Wednesday, March 21, 2012

Be Prepared for Bad Financial Times

"Be prepared." ~ Boy Scout Motto

The Great Recession has taught me a tough lesson. It's not how well I do during the good times; it's how well I survive during the bad times.  Here are some of the strategies that helped us during the bad financial times.

  • Live below means.   Earn large, live small. That way when income is reduced, it won't be as difficult do adjust. Living below my means was tough to do when I first started working since there were a lot of "start up" costs to be on my own after graduation from college.  However, over time were able to live on about 70-80% of my take home pay. 

  • Avoid debt. Debt payments remain constant in good and bad times.   Debt payments are nearly impossible to reduce, unless you're Greece, an underwater homeowner, or bankrupt.

  • Save early and often.  Additional corollaries to this are:  1) Pay oneself first and 2) Have an emergency fund.  There is nothing better than spendable liquid assets or cash during an economic crisis.

  • Of course, being prepared doesn't guarantee survival, but it sure does increase the chances significantly.

    For more on  The Practice of Personal Finance, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2012 Achievement Catalyst, LLC

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