How to Survive a Financial Firestorm
As everyone knows, our financial system is in crisis. We hear dire warnings that this could be a “disaster” and could “wreck” the world’s economy. President Bush went on television this week. Congress and both major Presidential Candidates are trying to figure out (1) what to do, and (2) how to spin it to their advantage. And millions of us “average folk” are trying to figure out what, if anything, it has to do with us.
I certainly don’t have the final answers to these complex questions. My sense from watching the markets and cable news is that no one seems to have much “expertise” in this thing. But as an investor and business coach for about 30 years, I have learned a few things and will share my best ideas with you. How can you and I survive and perhaps benefit from this thing?
1. Stay calm. In any crisis, those who remain calm fair the best. For most of us, the impact of this financial crisis will be minimal, long-term and gradual. Most of us do not need a home mortgage this year. Most of us do not even need a car loan right away. Our savings and investment accounts are insured and while our investments may take a hit, we’re not likely to be devastated. A diversified portfolio will bounce back. Stay calm!
2. Play good defense. Money for loans and business expansion is going to be very, very tight for the next several months (or longer) so if you can avoid borrowing, do so. It won’t help the economy and car dealers will hate me for this, but don’t buy a new car on credit. Repair the old one or buy a good used one. Minimize vacations, holiday spending and other extravagances. Borrow as little as possible. Avoid using credit cards. In any financial crisis, “cash is king” so deep your powder dry.
3. Protect your income. If you own or manage a business, focus on your highest margin lines. Work with your best customers to keep them buying. As always, cut costs. And if you work for someone else, make sure you are the world’s BEST employee! Go the extra mile. Improve your skills (up-grade your training–at your own expense if necessary) and if the worst happens, be the last one laid off and the first one re-hired.
4. Improve your credit score. Eventually, we all need to borrow for education, home improvements or that new car. When the time comes, be sure you are the most credit-worthy person in line. Pay down credit cards and pay off consumer loans. Make payments on time and save as much as you can. Get and check all three of your credit reports carefully and correct any errors. Put yourself in the best position you can.
5. Look for opportunities. In every financial crisis, many people panic and lose, but a few always profit. Right now, real estate is deeply discounted and if you have the resources, it can be a great time to invest. A few businesses will boom during a recession. Is there a way for you to help others and benefit at the same time? Warren Buffett just invested 5 billion dollars in Goldman Sachs. I don’t have that kind of money (or his skill), but I assume he expects their stock to bounce back. At some point financial stocks will be a “buy.” Be smart. Find your “golden parachute” and play the opportunities during this melt-down.
6. Finally, it’s worth repeating: stay calm! Eventually, this will pass. On the night of the big “crash” in 1987, Mary and I invested almost all we had in some diversified index funds. A year later we were delighted with the results! The “Bail Out” from Congress won’t be “fair” and it may not even be rational, but one way or another, our economy will bounce back. Take care of yourself and your loved ones. Be smart. Be patient. Stay calm and look for the opportunities. You’ll be glad you did.
When things are good, many people hire coaches
as a “luxury.” When times are tough, it becomes a
necessity. Can you (or your business) afford to go
through this crisis without a coach? This may be the
perfect time for the advice, counsel and perspective
of a coach. Email me and let’s talk about it.
Coach@philiphumbert.com
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