To say the recession has been a monstrosity is an understatement. To say it has been one of the worst if not THE worst economic meltdowns is more accurate. But to be candid: it downright sucks.
In every gloomy sky lies a silver lining, so I’ve outlined several major points of the lessons we’ve learned (or should have learned) from the recession…
Ergo, a Recession Survival Kit.
Get Your Emergency Fund Up
Some financial advisors recommend an emergency fund or account (e.g. a checking, savings or CD – certificate of deposit) consisting at least three months of living expenses. I insist on increasing emergency funds to at least twelve months of living expenses. Sure you may not make a great return by leaving your money in these low yielding accounts, but it would be available and easily accessible should disaster strike. No matter your salary or net worth, it is critical to maintain an emergency fund at all times. Even the legendary Warren Buffett himself; one of my favorite all time investors and businessmen, should have an emergency fund…which I’m sure he does.
Always have alternative means of income
Some people are satisfied with having one source of income. However, the recession proved that one income could easily be taken away by furloughs, mergers, layoffs or closings. Besides your main income, it’s important to have a supplemental source. I’d prefer one or two options. Utilize some unused talent you possess, a hobby that can be turned into profit or work that you find therapeutic…and voila! You’ve found your alternative stream of income.
Diversify your Investments
How many times have you heard this one? This is a little different because I’m talking about investments outside of main securities – individual stocks, bonds, retirement accounts, mutual funds and etfs. Add other investments that aren’t completely tied to Wall Street like real estate investments and investing in privately owned companies. True, the real estate market crashed too, but some people profited heavily from the cheap stocks and low prices on real estate. (Think about the damage you could have done if you had 100k sitting around in 2008) By the way it’s good to spread your securities through non-related industries too.
Don’t Be Over-Leveraged
Consider getting a home loan that you can pay off in 15 years instead of 30 years or a 30-year loan with a monthly payment that doesn’t overextend you. If you’re stretching to make your payments, this may cause problems when life happens. On top of the mortgage payment, always consider insurance, tax, homeowners association fees and maintenance of your home. Also, minimize your credit card debt and try to keep your balance at 20% or less of your credit limit. This helps your credit score too.
As you consider the points I’ve shared, keep in mind that no plan is 100% bullet proof and one golden key doesn’t fit every lock. This Recession Survival Kit simply offers tips that are useful to anyone no matter their personal financial snapshot.
Charles W. (C.W.) Singleton
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