Survive or even thrive during a downturn
The economy has been slowing down for over a year now, and the threat of a recession is a very real possibility. Post 2008 the economy has never really recovered to the extent we have come to expect in previous cycles. It is a new normal. When there is a long-term change in the environment you cannot keep spending or saving in the same way and expect the same results. If you haven’t started making those changes, here are some pointers:
Fire-proof your career. There are careers out there that are dying or shrinking, make sure yours isn’t one of them. For example, car salespeople, estate agents, recruiters, bank tellers even financial advisory. Over the last couple of decades some jobs, like secretaries, have changed enormously (who remembers typing pools?) Many jobs are now service/concierge orientated. If you need skills, now is the time to bite the bullet and get them. This might not be a degree like it was in the past. It might be English and communication skills, technology or sales skills like self-confidence. Today everyone is expected to ‘manage’ themselves, those are skills worth acquiring if you want to advance. Computers are never going to replace a skilled salesperson or manager.
Ignore the Joneses. There is nothing more destructive to your long term wealth than trying to impress others. If your friends or family are really impressed with superficial stuff like cars, clothes or houses then buy them some time with a shrink and don’t play that game. Listen to your self-talk when you justify an expense. “I deserve it”, “It will get me a promotion”, “My clients will think I am successful”. Changing cars and houses frequently has an enormous impact on your wealth in the long term. I have written about this before, you can read it HERE.
Sit on your hands. Have you ever tried to change a sail in a strong wind? It is hugely difficult, dangerous, and once you have it up makes very little difference anyway. That is the same when it comes to investment in turbulent times. Changing your investment strategy on every little market movement rarely works, and can end badly. Have a solid strategy that you have worked out with a professional, then let it do its work. Your investment professional may suggest changes occasionally based on macroeconomic changes but that is what you pay her to do. At the moment for example, it makes sense for all medium and short term investments to be moderate to conservative because you need to preserve the capital. If you’re tempted to chop and change, examine your motivation. Is it fear or greed?
Cut the fat. If there is any left that is. Use an app like 22seven (android and IOS) to monitor your day to day expenses (way more fun than the old fashioned budget). I have written about this before, you can read it HERE. If you haven’t got an emergency fund of 3 months family expenses in a savings account, it might be worth going on a ‘crash diet’ for a few months to get it going. When a car or personal loan gets paid off, don’t rush out and buy another one, stick that money in the emergency fund instead.
Enjoy what you have, don’t hanker after what you haven’t got. Use that gym contract, use the sauna and steam room. Shower at the gym instead of home and save water and electricity. Cook at home, use an app like Pinterest to get new recipes – way better and cheaper than a recipe book. Look at streaming services like Showmax and Netflix, 1/10th the cost of DSTV. Don’t upgrade your phone the instant the contract is up, run it month to month, or migrate to prepaid so data doesn’t go to waste (with more and more free wireless it often is). Paint the house, renovate, redo the garden, but don’t go and throw hundreds of thousands away in moving house because you’re bored with what you have.
Action: Times are going to be tough for a while, learn the pleasure in being a ‘cheap date’. Get a professional to structure your risk and investment profiles then stick to the plan. If you have to cut back, don’t be embarrassed to ask your financial planner how – a good one will stick with you through thick and thin.
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Author Dawn Ridler ©