The Economic Recession Survival Kit
It is an unfortunate truth, most people react to economic difficulties in a manner which is the opposite of what they should be doing.
In their bid to improve their financial security they actually increase the risks they expose themselves to.
Before I go into any detail about how you might rethink your approach to the manner in which to deal with this recession (or depression) we find ourselves in, I feel it is worth taking a little time to take note of a few of the contradictions amongst our various national leaders.
Gordon Brown is adamant his approach of a significant 'financial stimulus,' (reliant upon huge amounts of borrowed money at our expense), is the right way to limit the damage.
Yet in December, the German finance minister Peer Steinbrueck was frank enough to state, 'A recession was unavoidable and governments should stop trying to outdo each other with ever bigger stimulus measures'.
He also stated, "The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," Finally, he described the actions of the UK Government as being 'crass and untested'.
More recently, the French President Mr.
Sarkozy dismissed the controversial cut in VAT tax in Britain as having "made absolutely no difference," adding "consumption in England has not only not recovered, it has continued to shrink.
" Yet this was one of the Governments most trumpeted actions.
He also added that London's City financial district "is plugged in to the United States...
but frankly when you see the situation in the United States and the United Kingdom, we don't want to look like them.
" On January 28th The International Monetary Fund (IMF) clearly stated the UK would suffer more than all of the other developed economies in what it expects to be the worst recession since the Second World War.
This was strongly refuted by both the Chancellor and the Prime Minister.
Yet we now hear from Mervyn King, head of the Bank of England that we are in the worst recession since the 1940's.
Even at a non political level, the dissention appears unanimous.
You may be aware that whilst being interviewed in Australia, Jeremy Clarkson commented upon Gordon Brown being a 'one-eyed Scottish idiot who keeps telling us everything's fine and he's saved the world and we know he's lying'.
He later apologized for the comment relating to Gordon Brown's personal appearance, not you note any other of his comments.
Even more telling, Lesley-Anne Alexander of the Royal National Institute for the Blind took offence to Jezzer's comment, stating, 'any suggestion that equates disability with incompetence is totally unacceptable.
' So it would appear that even the RNIB think Gordon's handling of the economic crisis is not competent! This leads me nicely onto the point of this article.
The only thing most of the worlds leaders appear to agree upon, is that to deal with this recession, adopting a protectionist approach by the various nations is the wrong way to go.
Yet many, including the UK, are already making subtle moves in this direction.
In many other respects they are at odds as to how best to deal with matters.
Who is right? It is my own view, the route taken by our Government is fundamentally flawed and it should not borrow a penny extra on our behalf to bail out any businesses, (banks, car manufacturers or any other business).
This would be very painful in the short term but as and when we do emerge from the recession/ depression, we will be a leaner more nimble economy which would not be saddled with crippling debt which would dramatically slow down our economic recovery to a crawl.
Recessions happen and we just have to learn to live with them, learn from them and come out of them lean and hungry.
You may disagree with me and you may be right.
Perish the thought of it but there is even an outside chance Gordon is right.
So with all of this conflicting information, what can you do.
In My Considered Opinion; 1.
Stop wasting time blaming the bankers or the politicians for the mess we are in.
Yes they screwed up as did the overpaid under accountable regulators but so did you and I.
We all made mistakes.
We accepted the easy credit, often borrowing too much, did not build enough capital reserves for a rainy day, stayed working for employers in jobs we do not like because of perceived security, invested in assets because they were the latest fashion and we wanted to believe the hype.
We were happy to see our pension funds grow from increasing company and bank share prices but not asking what risks were being taken to get these returns.
The list goes on.
2.
Stop sitting and waiting for someone else to solve your problems for you and to make all of your big decisions for you.
That is how we got into this mess, one exacerbated by the nanny state, risk avoidance mentality that is creeping like a plague through our nation.
We grew strong as a nation full of people with courage and prepared to take calculated risks to make good things happen.
Yet we seem to have lost this fire and have resorted to complaining instead.
3.
Take control of your lives, make your own economic decisions based on good sense and temper the inclination to wholeheartedly signing up to the argument presented to you that makes you feel the most comfortable.
4.
Find others who share your passion and drive to make things happen.
Share the work load, the benefits, the satisfaction and at the same time you spread your risk, whilst having the strength of an assorted skill set and contact base.
There are many good businesses failing at present, often, not because they are bad businesses or opportunities but there may simply be a failing in funding facilities or the skill set within the businesses.
Maybe you (and your friends) could take over these businesses for a pittance and turn them around.
Bear in mind, there are many landlords who will give very attractive terms not to fill their properties.
5.
Surround yourself with good objective advisers who will give you good unbiased insight and advice and support you well as you use these difficult times to create a stronger long term future for yourselves and your families.
Use all of the Governement resource to help you.
6.
Even if you fail, at least you had the courage and self respect to try.
Remember, 90% of the population spends their working days helping the other 10% achieve their dreams.
Which camp do you want to be in? If you are philanthropic, drive to control your own future and once you have achieved the success you desire, you can use your good fortune to assist those less fortunate than yourselves.
Let me give a few examples of potential mistakes many make.
We have mortgage interest rates at pretty much their lowest ever level.
So what are many mortgage borrowers doing with all of the money they are saving on their mortgage payments? They are using them to reduce their mortgage balance! You may think that is a good idea but I would contest that for many this is not a good idea.
Here we are with such low mortgage payments, so why pay off the mortgage? Your response may be, 'if I get made redundant I will owe less'.
Great, all you will have succeeded in doing is giving the bank more security for you debt.
If you get made redundant, the bank is not going to lend you your mortgage overpayments back! Yet you would need that money to live on until you can get back into work.
So when the bank does get around to repossessing your home because you have no money to service the mortgage, they are in the position of being more likely to recoup their capital when they sell the house and you are likely to have nothing to show for it.
This problem is compounded by the fact that getting access to credit at present is much more difficult.
So surely it makes more sense to build up your cash reserves where they are accessible to help you through the lean times should you find yourself in this position.
Many of you have deferred buying a new car 'just in case'.
Strangely enough, if you base all of your actions on the negative 'just in case' approach, the likelihood 'just in case' will become a reality for you, is significantly greater.
So why not go and buy that new car, help kick start the economy and grab a bargain in the process.
For many, the money spent on a new car is not likely to have a significant impact upon their ability to survive financially if they were made redundant.
Why not use the money you are saving on your lower mortgage payments to help fund setting up your own business.
Then you can spend your spare time building up the future you want and one you control.
It may sound scary but I would venture to suggest it is no more so than having your daily life controlled by those very highly paid people who profess to know much more than you do and often do not.
Even if running your own business does not appeal, you can use the money saved to pay for a course to improve your skill set, thus make you a much more attractive recruit for a future employer.
Invest in yourself.
What of those of you who have pulled their investments and turned them to cash.
Why? Yes they may be performing poorly at present but bank deposits returns are not exactly setting the pulses racing either.
When will you go back into the investment markets? When they have gone back up 20% or 30%? When you do, who do you think is going to be selling those assets to you? Probably the very institutions or investors who 'chose to buy' the investments from you when you 'decided to sell'.
Remember, selling your assets only works if someone is prepared to buy.
So ask yourself, why someone wants to buy what you are desperate to sell? Then ask yourself why you are selling.
Important Note.
I am not advocating you all rush off and treat the above as personal instructions.
Instead you should simply use these questions and others besides to challenge yourself as to what you are doing, why you are doing it and the wisdom of it.
Think a little out of the box and establish if there is a better way forward for you.
Then find the help you need to make things happen.
Remember, in times of adversity there is also opportunity! You may also find it useful to read this article in conjunction with an earlier article I wrote, titled, 'Recession Beating Strategies' which you can find on the website.
Karl Lavery CFP
In their bid to improve their financial security they actually increase the risks they expose themselves to.
Before I go into any detail about how you might rethink your approach to the manner in which to deal with this recession (or depression) we find ourselves in, I feel it is worth taking a little time to take note of a few of the contradictions amongst our various national leaders.
Gordon Brown is adamant his approach of a significant 'financial stimulus,' (reliant upon huge amounts of borrowed money at our expense), is the right way to limit the damage.
Yet in December, the German finance minister Peer Steinbrueck was frank enough to state, 'A recession was unavoidable and governments should stop trying to outdo each other with ever bigger stimulus measures'.
He also stated, "The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," Finally, he described the actions of the UK Government as being 'crass and untested'.
More recently, the French President Mr.
Sarkozy dismissed the controversial cut in VAT tax in Britain as having "made absolutely no difference," adding "consumption in England has not only not recovered, it has continued to shrink.
" Yet this was one of the Governments most trumpeted actions.
He also added that London's City financial district "is plugged in to the United States...
but frankly when you see the situation in the United States and the United Kingdom, we don't want to look like them.
" On January 28th The International Monetary Fund (IMF) clearly stated the UK would suffer more than all of the other developed economies in what it expects to be the worst recession since the Second World War.
This was strongly refuted by both the Chancellor and the Prime Minister.
Yet we now hear from Mervyn King, head of the Bank of England that we are in the worst recession since the 1940's.
Even at a non political level, the dissention appears unanimous.
You may be aware that whilst being interviewed in Australia, Jeremy Clarkson commented upon Gordon Brown being a 'one-eyed Scottish idiot who keeps telling us everything's fine and he's saved the world and we know he's lying'.
He later apologized for the comment relating to Gordon Brown's personal appearance, not you note any other of his comments.
Even more telling, Lesley-Anne Alexander of the Royal National Institute for the Blind took offence to Jezzer's comment, stating, 'any suggestion that equates disability with incompetence is totally unacceptable.
' So it would appear that even the RNIB think Gordon's handling of the economic crisis is not competent! This leads me nicely onto the point of this article.
The only thing most of the worlds leaders appear to agree upon, is that to deal with this recession, adopting a protectionist approach by the various nations is the wrong way to go.
Yet many, including the UK, are already making subtle moves in this direction.
In many other respects they are at odds as to how best to deal with matters.
Who is right? It is my own view, the route taken by our Government is fundamentally flawed and it should not borrow a penny extra on our behalf to bail out any businesses, (banks, car manufacturers or any other business).
This would be very painful in the short term but as and when we do emerge from the recession/ depression, we will be a leaner more nimble economy which would not be saddled with crippling debt which would dramatically slow down our economic recovery to a crawl.
Recessions happen and we just have to learn to live with them, learn from them and come out of them lean and hungry.
You may disagree with me and you may be right.
Perish the thought of it but there is even an outside chance Gordon is right.
So with all of this conflicting information, what can you do.
In My Considered Opinion; 1.
Stop wasting time blaming the bankers or the politicians for the mess we are in.
Yes they screwed up as did the overpaid under accountable regulators but so did you and I.
We all made mistakes.
We accepted the easy credit, often borrowing too much, did not build enough capital reserves for a rainy day, stayed working for employers in jobs we do not like because of perceived security, invested in assets because they were the latest fashion and we wanted to believe the hype.
We were happy to see our pension funds grow from increasing company and bank share prices but not asking what risks were being taken to get these returns.
The list goes on.
2.
Stop sitting and waiting for someone else to solve your problems for you and to make all of your big decisions for you.
That is how we got into this mess, one exacerbated by the nanny state, risk avoidance mentality that is creeping like a plague through our nation.
We grew strong as a nation full of people with courage and prepared to take calculated risks to make good things happen.
Yet we seem to have lost this fire and have resorted to complaining instead.
3.
Take control of your lives, make your own economic decisions based on good sense and temper the inclination to wholeheartedly signing up to the argument presented to you that makes you feel the most comfortable.
4.
Find others who share your passion and drive to make things happen.
Share the work load, the benefits, the satisfaction and at the same time you spread your risk, whilst having the strength of an assorted skill set and contact base.
There are many good businesses failing at present, often, not because they are bad businesses or opportunities but there may simply be a failing in funding facilities or the skill set within the businesses.
Maybe you (and your friends) could take over these businesses for a pittance and turn them around.
Bear in mind, there are many landlords who will give very attractive terms not to fill their properties.
5.
Surround yourself with good objective advisers who will give you good unbiased insight and advice and support you well as you use these difficult times to create a stronger long term future for yourselves and your families.
Use all of the Governement resource to help you.
6.
Even if you fail, at least you had the courage and self respect to try.
Remember, 90% of the population spends their working days helping the other 10% achieve their dreams.
Which camp do you want to be in? If you are philanthropic, drive to control your own future and once you have achieved the success you desire, you can use your good fortune to assist those less fortunate than yourselves.
Let me give a few examples of potential mistakes many make.
We have mortgage interest rates at pretty much their lowest ever level.
So what are many mortgage borrowers doing with all of the money they are saving on their mortgage payments? They are using them to reduce their mortgage balance! You may think that is a good idea but I would contest that for many this is not a good idea.
Here we are with such low mortgage payments, so why pay off the mortgage? Your response may be, 'if I get made redundant I will owe less'.
Great, all you will have succeeded in doing is giving the bank more security for you debt.
If you get made redundant, the bank is not going to lend you your mortgage overpayments back! Yet you would need that money to live on until you can get back into work.
So when the bank does get around to repossessing your home because you have no money to service the mortgage, they are in the position of being more likely to recoup their capital when they sell the house and you are likely to have nothing to show for it.
This problem is compounded by the fact that getting access to credit at present is much more difficult.
So surely it makes more sense to build up your cash reserves where they are accessible to help you through the lean times should you find yourself in this position.
Many of you have deferred buying a new car 'just in case'.
Strangely enough, if you base all of your actions on the negative 'just in case' approach, the likelihood 'just in case' will become a reality for you, is significantly greater.
So why not go and buy that new car, help kick start the economy and grab a bargain in the process.
For many, the money spent on a new car is not likely to have a significant impact upon their ability to survive financially if they were made redundant.
Why not use the money you are saving on your lower mortgage payments to help fund setting up your own business.
Then you can spend your spare time building up the future you want and one you control.
It may sound scary but I would venture to suggest it is no more so than having your daily life controlled by those very highly paid people who profess to know much more than you do and often do not.
Even if running your own business does not appeal, you can use the money saved to pay for a course to improve your skill set, thus make you a much more attractive recruit for a future employer.
Invest in yourself.
What of those of you who have pulled their investments and turned them to cash.
Why? Yes they may be performing poorly at present but bank deposits returns are not exactly setting the pulses racing either.
When will you go back into the investment markets? When they have gone back up 20% or 30%? When you do, who do you think is going to be selling those assets to you? Probably the very institutions or investors who 'chose to buy' the investments from you when you 'decided to sell'.
Remember, selling your assets only works if someone is prepared to buy.
So ask yourself, why someone wants to buy what you are desperate to sell? Then ask yourself why you are selling.
Important Note.
I am not advocating you all rush off and treat the above as personal instructions.
Instead you should simply use these questions and others besides to challenge yourself as to what you are doing, why you are doing it and the wisdom of it.
Think a little out of the box and establish if there is a better way forward for you.
Then find the help you need to make things happen.
Remember, in times of adversity there is also opportunity! You may also find it useful to read this article in conjunction with an earlier article I wrote, titled, 'Recession Beating Strategies' which you can find on the website.
Karl Lavery CFP
Source...