The last five years has been a rollercoaster in the global economy. From the bursting of the housing bubble, to the fall of Lehman Brothers, to the escalating Greek debt crisis, many ordinary workers are dealing with the fallout from all of this uncertainty. Here are five lessons that today’s economic unpredictability has taught us about our personal finances.
Don’t take on too much debt. Debt is a manageable expense during the good times and a burden during the bad times. If you are faced with an unsustainable situation, seek debt advice or debt counseling. Many times lenders are interested in working out a deal. A debt settlement or agreement will help them get some money back and help minimize the hit on your credit.
Have liquidity. In times of economic uncertainty, cash is king. Having liquidity in cash or cash equivalent money market funds will allow you to make investments, maintain access to funds, and if you are anything like me, sleep more soundly at night. Cash is an important element in sound personal finances. The housing crash of 2007 has demonstrated that home equity – which can vanish overnight and may take years to recover – is no replacement for good ol’ cash.
Keep saving. If you have been tightening your belt for the past several years, recession fatigue might be setting in. Splurge on small treats, but if at all possible, keep saving. A healthy emergency fund is crucial in an unstable economy, because it will be your first line of defense against unemployment or other unexpected expenses.
Be appropriately insured. Among competing demands for the family dollar, insurance might seem like an afterthought. But it’s penny wise and pound foolish to get rid of insurance. Given that many medical emergencies and illnesses cause bankruptcies, it is essential to maintain some form of health insurance if you can. Also, don’t forget about life insurance or car insurance. To make sure you are getting the best value, adjust your deductibles to as high as you can afford, and make sure you are not over- or underinsured.
Invest in your career. For most people, earnings from their career is their most important wealth-generating asset. When layoffs are rampant, it is crucial to continue to pursue career advancement through networking, skills training, and establishing and protecting your reputation within the industry. Even if you don’t have a lot of money to spend, there are easy-on-the-budget ways to career advancement. Go to a Toastmasters meeting to hone your public speaking skills. Check out free web tutorials on the latest Excel macros. Set aside $20 every month to take a colleague out to coffee.
These tips are especially important in a world where the national unemployment nears 10 percent and financial markets gyrate wildly. But no matter what the world economy is like, these lessons will help you establish and maintain sound personal finances.Well Heeled is a guest blogger from WellHeeledBlog. In exchange for sharing this content, the Allstate Community has compensated her via cash payment.