How to Thrive in Hard Times

Invest for the future, reduce your debts, and insure your income

How to Thrive in Hard Times

TODAY’S economy is vastly different compared with our parents’ generation, and even those of us in ‘stable’ jobs should be prepared for increasingly rapid technological change and a continued downturn.

The competitive landscape can change at any time and in ways that you may not have expected. If you are unexpectedly laid off or demand for your company’s products suddenly plummets (think Blackberry), then you will want to have a healthy financial buffer to buy you time to recover.

If you want to thrive during hard economic times, then consider adopting the following three remedies for an empty purse:

1. Invest for the Future

Regardless of your current financial position, it is wise to save a fraction of your current income and invest for the future. George Clason, in his best-selling novel The Richest Man in Babylon, provides the following advice:

  1. Save: save at least 10% of your income each time you get paid,
  2. Invest: put your savings to work by investing in sound investment opportunities which offer safety of principal and a fair return, and
  3. Grow Your Earnings Potential: pursue a life of continuous learning and constant improvement; invest in yourself with the aim of increasing your earnings potential.

2. Reduce your Debts

As you know, debt is a form of financial leverage which can enable you to spend more than you earn.

Debt needs to be used with extreme caution because, while defaulting on your debts may be possible (hat tip to Greece), bankruptcy is a sure path to conflict, instability, and personal suffering. In earlier times, bankruptcy was punishable by death. And while this may no longer be the case, bankruptcy will still expose you to social stigma, personal difficulties, and make it difficult to borrow money in the future.

You should keep your investment debts within reasonable limits, and eliminate consumer debt as far as possible.

Consumer debt includes things like credit cards, purchases on deferred payment terms, and fixed payment contracts like rental agreements and cell phone plans. The largest consumer debt for most people is their rental or mortgage payment obligations, and so a good way to significantly reduce your consumer debt is to work towards owning your own home.

3. Insure Your Income

Clason advises in The Richest Man in Babylon that you should “provide in advance for the needs of thy growing age and the protection of thy family.”

If you are not adequately prepared for hard times, then setbacks in your health, the economy, or a tougher than expected competitive landscape could have a long term impact on your family and your quality of life.

One way to protect your lifestyle and your family is to take out insurance: life insurance, income protection insurance, and property insurance.

Although Income Protection Insurance is an often overlooked option, it may be a sensible one since it can buy you time to recover in the event of an unexpected illness or injury. Income Protection Insurance is probably not appropriate for everyone but, if you are interested to explore the available coverage options, your best bet would be to speak with a specialist income protection provider in Australia or where ever you are currently living.