If you want to make sure the next economic slump doesn’t harm you and, on the contrary, makes great opportunity for you follow the Winter is Coming theory. Its simply states that winter always comes you just don’t know how hard it will be, so plan for the worst, hope for the best and get ready to take advantage of the rest.
8 Ways To Protect Your Finances
Here are some ways to protect your money and finances in a recession:
1- Take a financial stock of all your assets, money, expenses, debts and obligations. You should do this at least once a year so you can take advantage of economic booms to get your personal finances in line so that when the next downturn hits it won’t take you down with it.
2- Build an emergency fund like a savings account, it can get you through a rough patch. If you don’t already have one now is the time to start one, if you have saved more.
3- Avoid Unnecessary spending and cut expenses you can live without- it’s not only about how much money you make it’s also about how much you spend. The less money you need to pay your bills, the longer your money will last you.
4- Don’t take on more debt unless the asset pays for the debt service. Don’t buy a depreciating asset like a car, for example, and if you buy an appreciating asset like an investment property make sure the rental income will cover the debt service
5- Create extra income streams something you can do in addition to your full-time job to supplement your income or create some sort of rental income whether it’s a room in your home or your car.
6- Ensure you have a high credit score- at all costs raise your credit score or protect it. Credit is your key to leverage and leverage can be a powerful tool in an economic downturn whether it’s to save you money or help you acquire more assets.
7- Pay down high interest debt- this will hurt your pocket initially but will get you out of the debt trap that is impossible due to high interest rates, and will result in long term relief later.
8- Don’t panic- stick to your investment strategy no matter what the market does- over time things correct. The worst you can do is be reactive daily to the market and make changes to your investment direction out of fear
Closing Thoughts
There can’t just be always good times, bad times must happen. So, when the good times do roll, use that time to prepare for the bad times using the tips we talked about. And during the bad times get tighter like the banks do, your family’s bank account is your business and you need to budget. Real estate investments are best purchased during the downtime with the savings from the boom, to find great buys right now reach out that’s what I’m doing!
If you are looking at the option of selling a home in the San Francisco or Peninsula in the near future, please reach out to us.
