The business and finance news in Australia lately has been full of talk of an economic slump, of the threats to the Australian economy from a credit crunch in China and a slow down in the mining “boom”. All of this can seem quite frightening for your prospects as the average Aussie worker, investor, or as a business owner. In further disturbing news, a report was released by professional accounting body CPA Australia revealing that nearly one third of ASX listed businesses are at risk of financial catastrophe.
Whether predictions for the Australian economy happen or not, can you survive in a slow economy? History shows us that economies run in cycles where there will always be highs and lows, in fact, many people not only survive slow or recessive economies, but actually thrive during them. Financial experts such as Robert Kiyosaki will tell you that in fact he has increased his wealth during tough economic times and many others have done the same.
So, what’s the deal? Do you need to be super-rich to survive or can the average income earner or business owner get through just fine as well? Here are a few simple tips which can help:
1. Be prepared
It’s very easy to blame “the economy” and it’s something that business owners frequently lament, but let’s keep in mind that since the beginning of time businesses have experienced cycles of good times followed by leaner times. The difference between who survives and who doesn’t? It often comes down to understanding that these cycles happen and being prepared for them.
Being prepared means:
- Knowing how to work smarter in your business.
- Knowing how to promote your business (without necessarily spending a lot of money).
- Not falling into a trap of being big spenders while the economy is good – you don’t want a huge increase in monthly break-even.
- Staying relevant.
- Income earners – this means you too! Don’t fall into a trap of matching income to expenses while times are good.
2. Knowledge and discipline
Having knowledge of how to effectively manage your finances (possibly hiring a financial adviser to help) is a great skill to have to get you through any type of economy. They key is that you must have the discipline to follow-through. That means applying that knowledge in both lean and good times and sticking to an effective budget.
3. Reduce debt
It’s a no-brainer really but there are still many people throwing things on the credit card and being charged interest when they don’t pay the full monthly balance. It comes back to living within your means. You should have a solid plan to aggressively reduce any debt which doesn’t produce income or isn’t tax deductible. A good financial adviser may be well worth your time for figuring out your personal situation.
4. Stay invested
If you watch rises and falls in the stock market and other investments too closely it’s easy to see why some people panic and withdraw their investment. The thing is that you really need to look at the prospective long-term returns as most investments are better over the long-term. If you can’t afford short-term losses because you are relying on having that investment available soon, you are possibly invested in the wrong area. Get some solid expert investment advice and make sure that you are invested in the right places to serve you.
If you are one of the many caught in the trap of matching income to expenses, it may be an idea to look at downsizing and banking the excess.
6. Be entrepreneurial
They say ‘money flows like water to good ideas’, if you have a great solution to a common problem, then consider implementing it! There are plenty of ideas for starting businesses with little or no overhead and it could just be a good way to replace or top-up current income.
7. Pay yourself first
Yes, I’ve probably said this a million times before but I like to bring it up because it is such a simple strategy yet so many people still don’t do it. Start paying yourself first every time you get paid by putting a sum of money away. The idea is to build that up to making investments and having your money work for you, but at the very least you will have a back-up plan if things get really tough.
What do you think? Is there anything you would add for surviving a tough economy? Let me know below…