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