Economists have been warning for it since the beginning of the current economic downturn; another economic downturn. A second wave. A double dip. You name it. Considering the fact that economic growth is still fragile, that Greece is on the verge of bankruptcy and the United States is reaching a debt ceiling of nearly 15 trillion dollars, things don’t look good. It’s time to get prepared.
Don’t take part
Assuming that you will be a victim of an economic downturn changes your behavior. It makes you defensive. Instead of assuming the crisis will eat you, eat the crisis! Decide not to take part and continuously seek for ways to avoid the crisis. You might have noticed that the current economic crisis hits hard in the financial business, on the housing market and in sectors that are highly depend on a healthy economic system, in particular luxury goods. Avoid these industries if you can. In case you work in one of these industries, you might even want to consider to change jobs now, instead of when those who are yet to lose their jobs will start searching.
Save some cash
Save money when you have it. Save money now. Simple. You can then spend it when things are really bad. That doesn’t only benefit you – hey, you have cash during the darkest of economic times! – but also society! After all, spending money puts the economy back on track (earned money, not borrowed money).
Think out of the box
Most people in western society think in the following economic boxes:
I need a job
so I make money
to pay my rent or mortgage
and what’s left I save
against a nice interest.
Within the means of what’s legally permitted – I am not telling you to rob a bank here! – there are a lot more ways of going around financially, to either earn or save money. Think out of the box!
- There are other ways of making money than a traditional job. You can be self-employed, you can work as a freelancer, make money by writing articles for a local newspaper or simply by getting yourself two part-time jobs!
- Renting a place from a landlord? It could be hard to find such a nice tenant like you! Ask your landlord a reduction on the rent, either permanently or temporarily. Without a reduction, you might have to look for something cheaper… ;)
- Most people save their money with the bank they’ve been with for their entire life. There might be other banks with better interest rates. Look around! Keep your money with so-called system banks – these are banks that are considered too big to let fail and thus are most likely to be bailed out should they get into trouble
- Get rid of long-term contracts, such as your cell phone contract, or try to reduce their cost.
Create multiple sources of income
Spread the risk ánd create yourself an additional source of income at the same time! The most wealthy people on earth have multiple sources of income. They make money from a job or from the company they own, get royalties from their books, invested some money here and there, speak at events, and so on. Some of these opportunities are only available to the most successful, others are available to you right now! Offer the neighbors to walk their dog every day for a few bucks, start a blog about something you are interested in, write an ebook, organize a garage sale, post links to your favorite books on your Facebook page with an affiliate link… There are plenty of sources!
Be prepared to step in!
Some of the most successful investors and traders stepped in when things were bad. When stocks are cheap and everyone thinks you are crazy when you say that you are going to buy some stocks, think about buying some stocks! Since I am by no means an expert on trading, I would recommend you to properly inform yourself before you enter the stock market and to seek the advise of someone with experience. When you have some cash in the bank, you can use the darkness of a double-dip to study the successes and failures of trading and step in as the sky clears up. In case you are not comfortable with the risks that come with trading, you can safely disregard this paragraph. But in case you are interested in stock trading, this is the time to shape up!
Assume you don’t know what is going to happen
Economist, scientist and writer Nassim Nicholas Taleb already said it back in 2008: “Do not believe we know what is going to happen. We don’t know.” Every day, hundreds, thousands of economists and politicians all over the world try to forecast what is going to happen tomorrow, next week, next month or next year. There is little consistency in these many projections, and as such, we could as well consider all of them bogus. The most renowned economists have been wrong, zoo monkeys have been right (so was Paul the Octupus about the World Cup results, but hey, we’re talking economy here!) Sometimes, it could be great to use just your gut feeling. Does the current state of the economy look like the start of something beautiful to you..?
I am not an economist or financial expert. But one doesn’t need to be one to be affected by the economic crisis, nor to think about how to reduce the impact of a crisis on ones’ life. Be prepared, like you get prepared for a long weekend at home as a snowstorm approaches. Have a plan, or you will become part of the plans of others!
Photo by ilco