May 14, 2009

Recession-proof your money

"ECONOMIC crisis" or "recession" - these are words you have heard of over and over, be it on the television or the radio and read in the papers. The financial headlines and where the economy is headed are things beyond our control. However, it isn't all bad! There are steps we can take that are well within our control to weather the bad times. All you need is just a little bit of foresightedness to prepare yourselves for the worst case scenario.

How to keep your head above water

Many of you out there have been asking this question, or variations of it. People are interested in the ways of surviving hardships that they foresee await them. Here, we list some of the things you can do; things that are definitely within your control to weather such hardships.

* Manage your expenses - watch what is going out of your pocket!

* Manage your expenses - watch what is going out of your pocket!To start with, scrutinise your expenses; identify your fixed and variable expenses. Variable expenses will include meals at your regular eateries, gourmet coffee breaks, shopping trips, which can be reduced and adjusted with a just a bit of self discipline and restraint.

How about fixed expenses then? These are the regular expenses that you cannot avoid or immediately reduce with your changing financial situation. Items that fall under this category are usually the big ones on your spending list.

Examples of fixed expenses include:

* Mortgage payments for your house, car loan or student loan

* Mortgage payments for your house, car loan or student loan* Insurance payments

* Insurance payments* Utility bills and service contracts, such as water, electricity, phone and internet services

* Utility bills and service contracts, such as water, electricity, phone and internet services

While you cannot really eliminate these expenses, there certainly are ways to reduce the spending in this category.

* Be an intelligent consumer!

* Be an intelligent consumer!During an economic down turn, what a government typically does is to take stimulus actions, such as reducing interest rate to encourage public spending. You can certainly benefit from this by shopping around for cheaper rates and better deals to refinance your mortgages. A variety of packages are offered by commercial banks and all you need to do is to choose the best deal, one that can cut down your interest payments. This move alone can save you quite a bit of money in the long run.

The same goes for other items. As the business environment gets more competitive, you will find an array of special deal packages and promotions being introduced in the market. You need to mould yourself into an intelligent consumer. Practice scouting around for the best deals available and make sure that every ringgit you spend is worth it.

* Resist! Resist! Resist!

* Resist! Resist! Resist!While you're busy trying to cut down on interest payments and looking for value for money alternatives, make sure you resist the temptations of further spending. Any efforts made to help you save will be meaningless if you deplete your cash and land yourself with additional commitments. So, Resist! Resist! Resist! Remember! Only spend on what is necessary and delay those that can be delayed!

* No More Credit Card Mania!

* No More Credit Card Mania!If you are one of those people famous for saying "Charge it!" with no qualms whatsoever, then it's high time you drop that habit.

As the market is flooded with credit card offers, it is quite common for a person to own a handful of credit cards. While credit cards provide convenience, it can work against you if you lack discipline.

Charging purchases to your credit card is basically spending future money. The more you spend and owe the bank, the more you have to pay as the interest builds up. Therefore, in order to manage your expenses more effectively, limit yourself to just a card or two and keep track of your monthly balances. Refrain from letting your credit card debt build up and, if possible, clear all your card balance every month at one go.

Failing to settle your credit can lead to dire consequences. If you look at the number of people who have filed for bankruptcy in Malaysia, you will discover that the number is rather alarming with many of the younger adults contributing to the statistics.

* Build up your reserve - keep the money in your pocket!

* Build up your reserve - keep the money in your pocket!Once you are able to manage your expenses, you will find a pleasant surprise - all of a sudden, you have extra cash! Use this to build up a reserve. This reserve needs to support you for at least 6 months of living expenses. If you have been laid off recently, don't use the compensation to renovate your house or buy a new car. It is meant to be your reserve. So keep it for the rainy days! If you have extras from the savings, then you can move on to the next step.

* Generate additional income - make your money grow!

* Generate additional income - make your money grow! "Inside of every problem lies an opportunity" - Robert Kiyosaki

If you are no stranger to the world of investing, then you can relate to what Kiyosaki is saying. Most people fail to see the silver lining behind a crisis; it is during the bad times that you will find plenty of good deals in investment, be it in the stock market, real property or other investment products.

As such, if you have the extra money, make it a point to study the market and look for investment opportunities within your risk tolerance level.

The bottom line is, you have to be more careful with your investment decisions, especially when dealing with your hard-earned money in times like these.

With careful planning and self discipline, you should be able to keep yourself afloat regardless of the economic situation.

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