Recession proof your life: Prepare the fortifications

I am continually hearing about the Global Financial Crisis (GFC) that countries (Australia included) are facing all around the world. 

One thing I have noticed however, is that the effects of the GFC have been having different effects on different people, and both on a macro and a micro environment.
The Macro Environment

On a macroeconomic level, the global financial crisis is taking a toll. 

Big businesses are cutting jobs, reducing anticipated profits, slicing budgets and working on becoming leaner companies to help get through the current climate. 

Controlling the repercussions on a macro level cannot be successfully achieved unless we take action on a Micro environment level.
The Micro Environment
Although I might have a different view from the text book definitions of 'Macroeconomics' and 'Microeconomics', for the purpose of this post I will be referring to Microeconomics as your personal life.
How has the GFC affected you in your life? 

Some people have lost their jobs, others have had to default on loans, others are struggling to get by. 

Why is this the case? There are so many questions that are not easy to answer.
While there is a lot of turmoil, I am observing a lot of people actually achieving more than they were prior to the GFC

People are now saving cash reserves, building 'Micro' businesses and paying off debt that previously would have been ignored. Others further still are beginning to position themselves for a transfer of wealth and will cash in on the chance to become rich. 

Some have found that while they have lost their job, they now have more quality time with their families which they had often taken for granted before.
To impact what is happening on a macro level, we need to begin looking at how we can impact the micro level (in this case ourselves and the way we act). How can we impact the micro level in our lives? 

Below is a list of things I am seeing the successful people around me begin to undertake which is helping them not only to survive through the GFC, but to actually prosper through this time:

  1. Setting new goals life-long goals.
  2. Paying off principle on loans and other debt.
  3. Building cash reserves in a form with high liquidity (savings, term deposits, etc).
  4. Increasing the leverage of time (using the 80/20 principle and other time management techniques) to being able to produce more sales, work more hours and decrease time that is not productive.
  5. Ceasing to purchase unnecessary 'wants', and focusing more on the 'needs' in life.
  6. Establishing additional income streams (I.e: eBay, blogging, new revenue models in a business, an extra job, overtime, etc).
  7. Reinvesting profits into themselves, their businesses and their education.
  8. Increasing their networks (both online and offline).
  9. Selling, eliminating and reducing marginally profitable deals.
  10. Selling unnecessary and old household items (either via a garage sale, eBay or to friends and family).
  11. Simplifying lifestyles (I.e.: partying less, going out on picnics and more 'affordable' outings).
  12. Exercising and focusing on their health (although gym memberships might cost money, most people can't afford to be sick during hard economic times, and want to improve their health to perform better).
  13. Starting to work for themselves (outside of employment, or instead of employment).
  14. Reducing expenses (selling bigger cars, changing insurance plans, negotiating bank fees).
  15. Saving any additional government contributions (I.e.: Spending bonus from Kevin Rudd in Australia).
  16. Deferring cost and time consuming hobbies and projects (temporarily).
I was listening to an interview earlier today with Steve McKnight and Mr. Peter Daniels on the current economic situation. In this interview Peter explained the importance of having a 'cash reserve'. Peter mentioned that the bigger his businesses become, the higher the reserve of cash becomes.
Peter also mentioned the importance on measuring daily how things are progressing using mathematical calculations on your finances (I.e.: Cash flow statements, P&Ls, etc.). Steve McKnight has covered this before on one of his old sites also (view the article here), and I think it is an important point.
How do you know if you are sinking or swimming if you are not monitoring and managing your progression? 

Should things take a downwards turn, what is your safety net to fall back on?

Personally, I tend to follow the advice of successful people. 

If it is good enough for the rich to build their cash reserves and to monitor their cash daily, while cutting expenses, etc. then it is good enough for me too.
Have you given thought to taking action to recession proof your life? 

How could following the observations of the successful people around you help you improve your current situation?

No comments:

Post a Comment