Thursday, December 4, 2008

Financial Crisis, Get ready Now…

Many people all over the world are being affected by the current  coinseconomic or financial crisis. Today, I want to talk a bit about how to prepare. Yes, I know, for some, it is late. That is why I wrote the previous set of articles. Today, I am talking to you, the entrepreneur that because of his or her work ethics and foresight, have been able to keep afloat, and maybe prosper in these difficult times. But I do not want to forget those who read my previous posts, and are just threading water, since this situation will come to pass, and you will see better days. When those better days get here, make sure that you don’t forget the lessons of today.

Here is a list of a few things that we need to do now:

1. Create an emergency fund. Set aside, if possible, the amount of money needed to pay our bills, and survive, for several months. Survive means: eat, dress modestly, and pay the mortgage and utilities. You might be called upon reducing your utilities bill. This might be done by reducing your Satellite TV account, or by using skype instead of regular home phone. So called experts will want you to believe that you need to have access to the amount of money needed to live without an income for six months. Consider this: if you loose your job, unless you have being proactive, you might not get another one, similar to what you were doing, for several years. But you might be living from calculator pay check to pay check, so you will need to start by streamlining your expenses, tell your kids that the cell phone privileges will be postpone to a later date, and that the $100 sneakers will have to wait. Trim down your budget, and that extra money, put it aside until you meet your goal. Let’s face it, we have lived as well as we possibly could for years, now is time to tighten our belts, and make do with what we have. If you are not in a pinch, congratulations, remember to be grateful, and help those who have less.

2. The Federal Deposit Insurance Corporation (FDIC) was created here in the United States, in the first part of the twentieth century, and up until recently, used to insure up to $100,000.00 deposits. What this means is that if you have less than $100,000.00 in the bank, you will not loose your money, as long as your financial institution is insured. If you have more than $100K, consider branching out and place your money in several different financial institutions. I am not talking about having $100K in the Denver Branch of the First National Bank, and another $100K in the Colorado Springs Branch. What I am saying is to have your money in  more than one different Banks; not branches of the same Bank.

3. Establish a budget. If you can live without it, you  budgetingdon’t need it. No, Starbucks is not a necessity, pack your lunch at home. You will be healthier, and save a lot of money.

4. Stop dinning out.

5. Stop pedicures and manicures. You really don’t need to go to the beauty shop or the nail salon if you can do it yourself. There is no need to go out with friends on Thursday, Friday, or Saturday night. Alcohol is not one of the basic food groups, and neither are cigarettes.

6. Trade your expensive car for a smaller, pre owned, and fuel My dream car, BMW Icetta! efficient. I know, oil is about $55.00 per barrel; but that price is this week. If the oil cartels have their way, we will be paying a lot more for gas soon. Remember the days of $125.00 per barrel? OH, yeah, it was just a few months ago… By doing this, you can drop a few hundred dollars of your monthly bills. If you just finished paying your car, do not buy another for a few years unless you really have to. Remember: want is not the same as need.

7. Lock up the credit cards. If you cannot pay cash for it, you don’t need it. Medical emergencies are an exception.

8. Keep the amount of money that you will need within the next seven to ten years out of the stock market.

9. I would consider investing in gold. Big nations are dropping their gold because they also need to pay their bills, so there is a lot of gold out awaiting to be bought.

10. Make sure that you become the company’s best master of the universe asset. There will be cuts, and downsizing, just make sure that you have cross trained and can perform your job and several others too, that will put the odds in your favor, and make you valuable, the more valuable, the less possibilities of a lay off. Just because you belong to the local union does not mean that you have a steady permanent job. If your employer goes bankrupt, the union’s contract, and negotiated agreements will need to be renegotiated. Unfortunately, many union bosses are way too greedy, and are killing the Golden Geese. By forcing the hand of the employers to agree to excessive demands, they are condemning the business to bankruptcy. Yes, the company can always streamline operations, but that also means cutting down in the personnel department.  Employers and Employees are in a symbiotic relationship. The one needs the other for survival, when demands are unreasonable and beyond what the employer can actually agree to, the situation becomes a parasitical relationship, and the host will end up dead. If the employees force the employer out of business, they in turn will become unemployed.

stretch your moneyThese ten suggestions can help you maintain your current status quo. However, that does not mean that you can become complacent. It means that you have the opportunity to prosper. As you do prosper, remember to make sure that you maintain a “what if” fund, and that you extend your hand to others that need help.

What did I forget? How are you preparing to navigate through this financial maelstrom? Make sure to add your comments to our blog.

* Disclaimer: I am not a financial advisor, nor do I dispense investment advise. These are ideas that have worked for me. Before you decide to invest, or not invest, or to pull your money out of the market, make sure that you get advise from a properly credited investment professional or financial advisor.

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diamondmum said...

nice blog. people need this now a days!thanks for posting!

J. A. Colon said...

Thank you Diamond.

Dee said...

I like #10. Hopefully, people will especially listen to that advice. Without a job, budgeting is irrelevant..

Donald B. Dousharm said...

Number 10 is key in the job force. I remember when my company downsized a year ago, I have been doing 3 positions ever since. I am not complaining though, I do them with a smile being grateful that I still have a good job.

Very well posted and at the right time too.


Thanks your blog~~

its really good advises

Stephen said...

Good tips though. Keep it up.

Extra advices during crisis:
1. If you got extra money, please buy those foreclosure properties.
2. Wanna take risk? Save some cash in Aussie Dollar, NZ Dollar or Iceland currency. They are now very low.
3. Wanna take another risk? Save little money in Iraqi Dinar.

Interested in link exchange?

MyUSICA said...

Interesting blog, thanks, really.
Please visit mine too :-)
Hi from Italy

J. A. Colon said...

Thank you Stephen, investing in real Estate now, if you do your homework, can be very productive in the near future.

MyUSICA, great blog you got there, I enjoy music.

Donald, you are oh so right. People tend to believe that just because is a regular job, is meaningless, it is meaningless up to the point they loose it and cannot get another.

rollingmovie said...

Very interesting.... thank you

inquitech said...

Nice post .keep up the good work