How To Beat The Economic Crisis

21st OF September 2011

By Anthony Bell, Finance Expert
www.bellpartners.com

The toughest part in uncertain economic times is often the constant media speculation and “bad news” stories being written and broadcast. It’s important to be aware of what is happening in the world, but always keep in mind that as individuals, we can do little to influence it, and no amount of worry or panic on our own behalf can alter that.

I like to remind myself regularly to concentrate my thoughts and efforts on those things I can have influence over. For example, whilst I can’t influence interest rates, I can influence how well I manage my spending and saving habits, so I’ll focus on that rather than the next meeting of the Reserve Bank. Just spending five minutes writing down what worries or concerns you and then marking off what you can and can’t influence can go a long way to clearing your mind of unnecessary worry and stress.

When you do find yourself worrying about what might happen in the world economy or with interest rates, keep in mind that over time the free markets of the world have a strong record of working through problems and coming out of difficult times in a better situation. For example, the economic issues of the last 4 to 5 years are much more complex than those that led to the Great Depression in the 1930’s, yet we have all maintained a better standard of living that we would have had 80 years ago with less complex problems!

On those things you can control, how much control have you actually taken? Have you reviewed your spending? Do you have a budget you work to? What savings and investments goals do you have? Remember that it’s the habit of saving and investing that is as important as the amount you save and invest. If you have a habit of saving and investing, then you could actually be in a position in the current environment to take advantage of the uncertainty by making investments at better prices than you could have 12 months ago. Some shares that are backed by strong businesses are selling at better value now than they have for a long time. A great rule is to try and buy your investments like you would your groceries, when they are on sale and are good value, not when they are expensive.

Another advantage of uncertain economic times is the opportunity to review some of your costs. Do you have a credit card with ridiculous fees that you’ve been meaning to change over to a lower cost option? Is it a while since you had your home loan reviewed for its competitiveness? In any economic environment there are businesses looking to do great deals to keep them competitive.

Tougher economic climates also remind us of some fundamentals. We need to keep a buffer of available funds in case something unexpected comes along, without needing to rely on credit or loans. To do this we need to spend less than we earn. The fundamentals of sound personal financial management don’t change with growth or decline in the share or property markets.

With your career or business there are also opportunities. When things are going well, it’s not so hard for everyone to look good. But when things are tougher, those that deliver great value and quality stand out more when a more critical eye inevitably gets applied by either employers or customers reviewing what they are receiving in return for their more scare dollars.

Again, we can do little individually to influence the headlines. But we can do a lot personally to take advantage of the opportunities it brings, and to keep our own situation in good order.