How To Survive Oncoming Economic Turbulence

Surviving a recession can be a challenging feat and none of us can afford to take this threat lightly. Banks are reeling under subprime losses. The real estate …

Surviving a recession can be a challenging feat and none of us can afford to take this threat lightly. Banks are reeling under subprime losses. The real estate market is struggling. The U.S. Government is finally seeing red in their economic predictions. What options do business owners, investors and employees have in this economy?

Survival tips for employees

Your company’s financial situation will dictate whether you keep your job or not. Every employee should start behaving like owner of the company and ask the questions that management usually asks. Where can you cut costs? What innovations can be implemented? Keeping the company afloat is a matter of self-preservation.

There are thousands of job aspirants out there, and many have spent a small fortune earning MBAs or other high-paying degrees. A bleak economy is something they have to prepare for. Forget about huge compensation plans. Look at the reality and, within your industry, take any job you can get. Financial security should be your first aim. You can’t wait for manna to fall from heaven.

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Re-Evaluate your stock investments

Investors in the stock market must be especially careful during times of recession. Economic indicators will bring down the market and the investors along with it. As a result, investors should have a serious look at their portfolio. 

  • Get rid of the “junk stocks” quickly, if you have not already done so. These penny stocks appreciate well at boom times, but they fall flat during an economic downturn. Many millionaires have become paupers overnight by holding these stocks when recession hits. Stop loss if you have already lost.
  • Go for the blue chips. Even in recession they are likely to hold on to their price. Over a period they would give reasonable returns.
  • Don’t use borrowed money to purchase stocks. Serious investors can be the biggest optimists of all and this optimism sometimes compels them to borrow in hopes that they will make a killing. A hot tip, a slight climb in a certain stock or a credible rumor may seem like "sure" signs of big bucks for some compulsive investors, but borrowing to purchase is a recipe for disaster.

Survival tips for the common man

Many popular books have started giving the impression that one can become rich only by investing passively. This mindset has taken root in many U.S. citizens. Work is passé; Taking financial risks means rewards. Here are some common-sense tips that may help, especially if you are one of the millions who have come to understand the fallacies of some of these “get rich” schemes.

  • It is an age old saying that money saved is money earned. Save a part of your income. Even ten percent is enough. It’s wise to avoid large expenditures.
  • Your credit card is your biggest enemy. You must bring your credit card liability to zero and then keep it away altogether.
  • Live within your means even if it means lifestyle changes. Bad economy does not mean becoming poor. It is simply a warning to watch your spending.
  • Start planning for early retirement. This will force you to think about your economic future. Investment in pension and retirement funds may help to secure your future. If you get laid off, you financial nest may help pad any unexpected expenses.

Survival tips for businesses

Small businesses may be the hardest hit due to the worsening economy, and it’s more crucial than ever to cut costs while maintaining the quality of the business.

  • Rather than renting out an expensive office, one can eliminate overhead by working from home. Finance and investment consultants, CPA’s, real estate agents and a host of other business can operate from home.
  • Look at your accounts receivable. Businesspeople should closely monitor their outstanding expenses and reduce them as much as possible. If you hold stock, inventory should be minimized. Shift the cost of carrying inventory to your principal by using ‘Just in Time’ policy, which will save you from investing in dead inventory.
  • Have another look at your fees. Can you become more competitive? Instead of charging $100 can you get by with $75? Customers are looking for a bargain and reducing your professional fees may bring you more business. Consider this to be one of your effective marketing tools during times of recession.

Fear of recession can be a big economic bully. Taking a measured, well-thought-out approach is the only prudent way out. It is all a question of managing your finances.

 

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