26 March 2008 No Comment Print This Post  Email This Post

The topic in the financial news world is the economy, more specifically a looming recession. At this point its no longer a matter of if a recession is coming, but rather when it’s coming and how long it’s going to last. Perhaps we’re already in one, so now is the time to make sure you’re running a tight ship so you don’t get swept away by the storm. No matter how busy everyday life seems to get, now is the time to make adjustments and prepare.

Income

With a recession comes increasing chances of job loss. I don’t want to sound negative, but you never know when you might lose your job. If you own a business, your income may fluctuate even greater than usual. Now is the time to start thinking about alternative streams of income. Look into starting an online business. For a near surefire way to make extra money, buy liquidation products with high turnover, like DVDs and name brand clothing, in bulk and resell them on eBay. If you have specialized knowledge or skills, offer your services on local sites like Craigslist. Building alternative streams of income is a win-win. If your primary source of income gets hit, you have other sources. If you don’t lose your job, you get another stream of income and a possible side business.

Expenses

I’ve always said that there are only two ways to build wealth. You have to make more money or spend less. The opposite is also true. There are only two ways to go broke during a recession, earn less like losing a job, or spend more than you should. Now is the time to make sure we avoid the latter. It’s time to trim off the excess fatty expenses. I was reading about a couple who saved $500 a month by reducing expenses they never thought about previously. Some of these include entertainment like the movies, on-demand, video games, and eating out. Spend some time and go through all your monthly expenses and make sure they are the lowest possible.

Investments

In these times of stock market roller coasters, you must do two things. The first thing is to make sure you are fully diversified and have a long term investment plan. I’m looking to increase my exposure to international assets by buying into global index funds and ETFs. The second thing you must do is to stop watching the market ticker all day. There will be ups and downs from here, and its normal to want to sell off to avoid the sleepless nights. Just remember that times like these happened before on many occasions and those who stuck to their investment plan made some good returns.

Take some time to make some adjustments and you’re finances will come out stronger than ever. The saying, “what doesn’t kill us makes us stronger” truly applies to tough economic times. I think that times like these are normal and in many ways, recessions are good for us.

Thumbnail image by wallyg