According to a published report ran by Bloomberg.com on February 7, 2009, “advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.” Time Magazine published a story on Friday February 6, 2009, titled “Why the Talk Has Turned to Depression” and cited some of the top names in business and finance as predicting economic depression.
While the dreaded d-word is becoming more a part of the mainstream economic dialogue, there are many experts that insist that we are not going to end up at that point. However, whether we are in a depression, headed for a mini-depression, or suffering through a really bad recession, we are surrounded by evidence of an economy in serious trouble. As Bloomberg.com recently reported , the first 6 weeks of 2009 have already seen 9 bank failures, in addition to the numerous high-profile failures of 2008. Unemployment, foreclosures, and the general cost of living continue to creep upwards. For those coming late in the game to the realization that there is definitely a real problem here, it is time to prepare, because the turmoil in the economy is expected to be with us for a while.
Strive For Fiscal Freedom Of Movement
One of the most limiting factors in how well an individual, corporation, or nation is able to function in our current economic climate has to do with the degree to which one is burdened by debt. One of the main reasons that so many are so negatively impacted by this particular economic downturn is that people, companies and corporations, and even governments are staggering beneath record levels of debt. Carrying that degree of debt doesn’t allow for the financial freedom of movement that would provide more resiliency in the faced of economic difficulties.
Thus, one of the most important things an individual can do is to work on dealing with debt. If carrying a large debt burden, now is the time to take steps towards reducing or eliminating that debt. This is important on a variety of levels. The current economic difficulties are expected to continue to be a part of our lives well into the immediate future, with many experts saying that we can expect things to get worse before they get better. Taking care of debt now means that if things do continue to deteriorate, once those debts are dealt with, you will have more resources available, as rather than having to pay down debt each month, you can use that money towards current economic needs.
Struggling with debt, as more and more people are doing these days, can result in a poor credit score. Bad credit can make it harder to get loans with reasonable terms and can limit the availability of a variety of opportunities, ranging from mortgages to car loans to employment to home rental. It is far better to take immediate steps to deal with debt now. Creditors today are worried about default, because those rates are rising. This works to the advantage of the consumer, as many creditors are willing to negotiate in order to ensure that they get a good portion of their extended monies back. Interest rate reductions and more workable payment schedules are often just a request away.
Diversification Of Income
With the number of lay-offs rising and recent unemployment figures nothing short of dismal, it just makes sense to try to protect yourself by having diverse sources of income. That way, a lay-off or hours cut is not so devastating, as there is money coming in from other sources. There are a variety of ways of doing this besides having to deal with punching the time clock at another job.
You can, for example, trade that gym membership in for a morning work-out that makes you money, rather than costs you money – a paper route. You can set your own hours with a variety of informal arrangements, such as housecleaning, elder care, child care, yard work, and the like. There’s Avon to be sold and a variety of other similar, well-established income opportunities. You can sell excess produce from your forward thinking, grocery bill reducing garden that took the place of that attractive but basically useless lawn. You might even approach local hoity-toity restaurants with organically grown herbs from the part of your yard that was devoted to pretty but not practical landscaping. Turn your hobbies into cash at local craft fairs. The possibilities are endless.
Make Tangible Investments In Your Future
Some economists are worried that we may experience a period of significant deflation, followed by a bout of inflation, perhaps even hyper-inflation. Many discount deflationary theorists, but are concerned that we may be facing a serious inflationary period in the near future. While opinions do differ, what does seem fairly universal is concern about the purchasing power – or lack thereof – of the dollar in the fairly near future.
While personal savings certainly do have value, despite the fact that the interest rates of today tend to be consumed by the annual rate of inflation, there is something to be said for well-stocked pantries and the storage of essential non-perishable goods. After all, even during good times, prices tend to rise ever upwards. Who knows what supplies will be in short supply or out of price range in the next few years? Money spent on ensuring that you won’t be running short of food and basics, even if the economy worsens significantly or in the event of a lay-off, is money well-spent in today’s economic climate.
Once that has been achieved, setting aside money for living expenses, even if it is just a little bit at a time is a smart move. Building bit by bit, having enough to cover six months of living expenses is an excellent goal. And, when you achieve that, keep on adding to your savings and enjoy the security of knowing that even if you have to endure a reduction of hours or a complete lay-off, you’ll have money to live on while you seek employment elsewhere.
While certainly we are experiencing a time of economic turmoil, taking a proactive stance can make a difference in how you and your financial situation are affected. Remaining inactive and hoping for the best or failing to recognize how trends in the economic world can affect you personally is a recipe for fiscal disaster. Looking at the big picture and making solid plans to protect your assets and your future will help make you more likely to be able to enjoy a certain measure of comfort and security, even in the midst of a broader economic crisis.
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