Money Management and the Next Great Depression - Protecting Your Money
Submitted by: Global Marketing Media
2008-10-23 23:01:41
Despite the ongoing efforts to save the U.S. Economy from disaster, the financial road ahead is going to be difficult for the vast majority of us. Instead of going into desperation and despair, however, one financial expert says there is much that can be done to protect yourself and contribute to an economic turnaround.
(OPENPRESS) October 24, 2008 -- The only thing certain about the U.S. Economy as of this writing is that there is still a lot of financial uncertainty. This is being reflected in yet another big drop in the Dow Jones despite the "bailout". Commentators, financial experts, and some of the smartest economic thinkers in the world still do not have a guaranteed fix for what is going on. As confidence plays a very large part in economic growth and stability, the lack of it could easily lead to despair and desperation.
But this does not have to be the case. Every single one of us, to a greater or lesser degree, all play a part in the health and stability of our economy. Although it is easy to get lost in the mind-numbing figures floated by Congress and Administration officials, the truth of the matter is that behind all of those facts, figures, and statistics, is a human being who is going to play an important part in our economic future.
No matter what happens, whether we have a Recession or in a worse case scenario, another Great Depression, our behavior and the way that we manage our money is going to have to change, and change in a big way.
Following a successful money management philosophy is going to determine how fast and how successfully we are going to weather this fiscal storm and come out the other end as an enduring economic power.
Although this may seem like a daunting task, the good news is that you can begin to take action, right now, to protect yourself against a bad economy and play your part in turning the situation around.
Well known money management expert and financial advisor Sandra Simmons has seen the economic writing on the walls for a few years now. She has written and lectured on the bad economic indicators long before it became fashionable to do so. Fortunately for her many clients, they are already well insulated against this current economic crisis. Her formula for protecting you against the next potential Great Depression is something everyone can do with a little fiscal willpower and discipline.
"The first thing you need to understand is what the word 'economics' means in terms of thinking about your personal or company finances, and how you can use what it means to your financial advantage," says Simmons. "Forget what the media says about 'economics' when they report on the gyrations of the stock market, the banking industry, the mortgage defaults and unemployment statistics. Those are 'economic representatives' that gauge an area that is bigger than you can personally control."
"What you do have control over is your own business and household economics," she continues. "The definition of economics I am using is the original one; meaning 'the art or science of managing a household or business.' And those are things that you, as an individual, can control."
According to Simmons, managing a business or household is an art. She maintains that it requires specific skills and abilities, like putting in organization so things run better. There is a science of managing a household or business, especially in the area involving money.
The following money management strategies are things that Simmons says you can do to guarantee that the economics of your household or business are strong and unshakable, despite the fact the general economy may be on the slippery slide to disaster.
Money Management Strategy #1 - Use CASH Not Credit
"Each time you buy something using lines of credit or credit cards because you don't have the money to pay for it, you are promising your future income to the credit card company," says Simmons with emphasis. "Those future earnings will undoubtedly be needed to pay your regular household or business operating expenses. That's when you end up in economic slavery known as the credit trap."
The only exception is buying property that increases in value, like buying a home instead of renting, or investing in a commercial building that puts more income in your pocket. Using your money to make more money is smart money management.
Important Money Management Tip: Be sure you negotiate a big discount when you pay with cash. When the rest of the world is on the downhill run to economic disaster and credit is difficult to obtain, the guy who has the cash is king. In addition, figure out how to purchase items wholesale instead of paying retail prices to keep even more of your hard-earned money.
Money Management Strategy #2 - Don't Spend More Than You Earn
Learn from your grandparents who earned little, but managed to live well. Reduce expenses to a rate that is less than your income. The most direct route to financial disaster is spending more than you make. You can keep a good quality of life while reducing optional spending. This can be accomplished by acts such as buying used equipment rather than new, and eating less often in restaurants. Don't buy something because you only want it, but don't really need it. It's just a plain good money management practice.
Money Management Strategy #3 - Money Must Be MADE Before It Gets Spent
"If there is some future large purchase you need to make, begin by setting aside small amounts of cash in a savings account for that purchase and keep that up until you can pay for it with cash," Simmons says in reference to the safest way to make larger purchases without using credit or going into debt.
On a household level, if your child will be entering college in 10 years, then figure out what the tuition costs will be and work out how much money you have to set aside every week to have the full amount just before they graduate from high school. Plus, turn in applications for each student financial aid package, scholarship and student grant you can locate.
On a company level, if you will need to purchase or upgrade equipment for your office, then figure out what the costs will be and work out how much money you have to set aside every week to have the full amount the month you will need to make that purchase. Plus look for each place you can locate to get the best deal possible.
Money Management Strategy #4 - Put Away Some Cash for Emergencies and Living Expenses
"You will sleep much better at night with the financial security of knowing you have money stashed away in a savings plan for emergencies like needing to repair the car or an office machine, having to have some unexpected dental work or experiencing a big drop in income," Simmons says. "When you have a cash cushion you can get your hands on immediately, then magically, you don't even worry about money, and your focus returns to living life and enjoying it, and earning money suddenly gets easier."
In reality, the primary thing you have to be afraid of should there be another Great Depression is not having enough (or any) cash reserves tucked away in a savings plan you could immediately get your hands on.
Out of every bit of income that comes in the door, immediately set aside 10% and stash it in an interest bearing account that you have designated for your cash cushion.
"Perhaps you'll have to cut expenses AND work an extra job to build your cushion of cash," concedes Simmons. "Now, no moaning about how you can't, JUST DO IT!" she exclaims. "As the weeks and months roll by you'll find you are sleeping better and are walking through life with a lot more confidence knowing you are on your way to financial freedom and have protected yourself from The Great Depression looming on the horizon."
Why is controlling the flow of your money so important? It is the energy and life blood of a household or business. It is vital to channel some of it through the income producing areas first to keep it running smoothly, and also to save some of it for future survival. Everything runs better when adequate cash is available.
Vice Presidential candidate Joe Biden recently stated that it is patriotic to pay more in taxes. That statement caused quite a stir and is certainly a point of debate. What is less controversial, however, and what truly would help your country get back on the road to wealth and financial security is following the money management points outlined above. If each and every financially responsible person in the United States got themselves out of debt, relied less on credit, and built savings and wealth, the American economy would be stronger than it has ever been.
This is the road map out. The rest is up to you.
Sandra Simmons is the President of Money Management Solutions, Inc. (www.MoneyMgmtSolutions.com). She specializes in helping business owners and individuals manage their money to achieve financial freedom.
