'5 Things to Do' to Prepare for the Approaching Financial StormApr 19, 2021
There’s no getting around it: financial setbacks happen. Markets crash. Corrections hit.
Every decade something strikes, and it tends to strike hard. The oil crisis of the 70s, Black Monday in 1987, the [dot]com bust of 1999, the Great Recession that started in 2008 … these are all real-world examples.
Kind of forgot about some of those, didn’t you? Every ten years or so, on average, major financial troubles come home to roost.
Are you prepared?
In all honesty, I’ll come right out and say it: doubtful.
If you’re like the average American today, you aren’t prepared. In fact, most people have what I refer to as the H-I-T-S: Head In The Sand syndrome.
We like it there. Like the ostrich facing a dire threat, we prefer the sand. It’s warm. Maybe it doesn’t feel all that great, but it sure beats standing there watching the tsunami rush in.
During an interview last year between Robert and Kim Kiyosaki, myself, and ABC News Economics and Technology Correspondent Rebecca Jarvis, we discussed this issue, among other things.
And what we tapped into was that economic trials and disasters don’t have to break us. They can actually provide opportunity … if you’re prepared for them.
Living in the Moment
Like lemmings, rats and most other creatures on this planet tend to live in the moment. They don’t have long-term aspirations. They don’t have dreams about the future.
It’s about survival.
Every animal understands the risks of each day instinctively. Sadly, many people have lost the connection to our survival instincts. We’re overwhelmed and inundated with stress every day that our mind and body just don’t respond to threats well.
More importantly, we don’t prepare for them. We prefer to live in the moment, get what we want now, and “worry about that other stuff later.”
People are so caught up in living for the moment that they aren’t even putting enough money into their retirement funds.
Robert, Kim, Rebecca, and I all agreed on some key points.
First, people aren’t saving. Not even close. When you realize nearly 8 out of 10 full-time working adults in the U.S. are simply living paycheck to paycheck, you understand they can’t possibly save for anything, much less invest for the future.
When people aren’t saving, they can’t withstand the inevitable ‘unexpected’ expense. Like a medical bill, a new furnace for their home, or a major car repair. It’s interesting, too, because when I see ‘inevitable’ and ‘unexpected’ together, it seems to be a conundrum. If something’s inevitable, shouldn’t we expect it?
Second, people are overextended. We carry so much debt, so when we consider setting aside 10 percent of each paycheck for savings and investments, we can’t justify it. “I need to cover this credit card bill this month” or “My mortgage payment just went up, so there’s no way I can start now” or even “I really need this vacation we’re planning for next year.”
The excuses pour in and no matter how much we earn, it’s never enough to cover our basic living expenses and save.
And third, there are things everyone and anyone can do right now that can lead them out of the rat race and get them prepared for the next financial meltdown. As I mentioned, it’s coming. It’s not a matter of if; it’s a matter of when.
So let’s take a look at how you can finally drag yourself out of the rat race, be prepared for the next economic downturn or financial disaster, and not just survive it … thrive from it!
1. Learn new skills.
If that sounds a bit obtuse, it’s not. Rebecca Jarvis brought this up and it’s a wonderful point.
What are you current skillsets? What are the things you can market and make money from? This is all about investing in yourself!
That’s a remarkable thought, isn’t it? But it makes perfect sense. The world is changing. Every aspect of it. And the demand for certain traditional skills is diminishing while companies are seeking new skills.
When the markets take a hit and you have more skills, knowledge, and education, you’ll be in a much stronger position to not only weather the storms, but also earn your worth. Remember, even when there are hundreds of applicants for one position, that doesn’t mean a company will pay less for the hire.
They want the best candidate, and that person is going to be worth the rate they pay.
Invest in yourself now, take advantage of free and paid educational platforms, and expand your skills. Of course, focus on what’s in demand and what is expected to remain in demand for the future.
2. Keep on top of current trends.
Sure, you may love keeping up with this celebrity or that one, enjoy reality programming, or staying on top of your favorite sports team and all their stats, but what about current trends in your industry?
If you don’t know how things are shifting, you’ll be more likely caught by surprise when management announces layoffs and cut backs.
But, if you stay on top of these trends, you might recognize your current skillset will be in less demand a few years from now and retool your knowledge base in order to make yourself valuable, even in the midst of those changes.
3. Earn more money … now.
Makes sense, right? At the end of the day, two things will help you live better for the future: spend less now or make more money.
Most people don’t want to cut their spending. They enjoy the lifestyle they have (and, unfortunately, even as people earn more, they tend to spend more), so it comes down to earning more.
That’s where you take the first two points and get out there to find ways to capitalize on your new skills and knowledge base.
Wherever you can do, find a way to earn more money now. Even if you’ve been living paycheck to paycheck for years, that’s fine. But, when you do earn more, save it. Don’t spend it.
4. Get organized.
It continues to amaze and confound me how disorganized people are with their finances. They have papers and receipts and bills stuffed in boxes or a file drawer. There’s no order.
If pressed, it might take some people days or weeks to find certain documents. When that’s the case, guess what? They don’t bother. Unless the IRS is auditing them, they won’t put the effort into finding most financial paperwork and forms.
That’s not a healthy way to live.
Instead, get organized. If you have no idea what your debts really are, where your investments are placed, or how much your spouse or partner is bringing in, you’re behind the eight ball, so to speak.
Here’s an awesome filing system I offer on my website: https://www.johnmacgregor.net/financial-filing-system. Take a look and get organized!
5. Focus on your credit.
There are two types of debt: good and bad. Bad debt is what most of us deal with regularly. It’s the credit cards, auto loans, etc. The things that cost us money, usually a lot of money.
Good debt is the kind you use to buy assets. Many Americans are financially illiterate, unfortunately. 65 percent, in fact. That’s a failure on the part of our school system, sure, but also on us as parents to the next generations.
For example, would you consider your house that you have a mortgage on and about 20 years left on that mortgage to be an asset or debt? Most immediately say it’s an asset.
Nope. It’s a liability. “John, how could that be possible? It’s real estate! It’s an investment!”
You sure about that?
Let’s say you pay your 30-year mortgage reliably for 27 years. Closing in on retirement, you’re feeling great. Suddenly the economy crashes. The markets fizzle and implode. You lose over 80 percent of your wealth overnight.
Your job is terminated; the company you worked for these past 38 years goes belly-up. The pension you were promised? Gone. Mismanagement or criminal behavior, it won’t matter. Not in that moment. You’re suddenly wiped out.
You find yourself falling behind on everything, including your mortgage. Within a few months, the bank moves to foreclose. They take the house. You get nothing.
Now, was it an asset? Not until it is completely paid off. Then, it’s an asset.
During a financial meltdown, there are abundant opportunities for people with good credit to use good debt to buy up assets.
That’s where the rich get richer. That’s how you leave the rat race.
Get ready. It’s coming. And I think you still have time before it hits. Whether your debts are overwhelming, savings in the single digits, and your credit in the tank, there’s time.
Not much, but enough. If you truly want to leave the rat race behind, these are some ways to get ready to make your move!
John MacGregor is an international best-selling author, global speaker, and financial mentor to thousands of people worldwide. For over 26 years John has been assisting individuals with their personal financial needs using paradigm shifting techniques and strategies so people can finally live the life they deserve to live. Check out John's website for a variety of free resources so you can immediately start your journey to financial freedom and peace of mind.