Posted: 31 Oct 2008 12:50 AM CDT
I was laid up with the flu-bug over the last few days and spent one whole day resting in bed to allow my body to recuperate.
When you are sick, you need to rest so that your body can recover.
When you are tired, you need to take a break, so that you can regain your energy to do your work.
When the market goes to pieces, like it has now, you need to take a break from the market and pause and reflect on what you need to do to fight another day.
I am heartened to see my poll (on the left) showed that most of you, my dear readers, are able to survive as 60% are coping. But 18% were frank enough to admit that “die already” or that the situation is indeed that bad. Only 5% managed to make money off this market by shorting it and it represented only 2 out of 40 respondents.
How do you live to fight another day?
In order to survive this turmoil, you should first examine your own state of finances. Not knowing your own assets and liabilities in terms of your finances makes you more scared than you should be.
Listing them down helps you establish if you in a net asset or net liability position. After you have done that, if you are in a net asset position, congratulations! But remember, times like these when asset values drop and the global economy uncertain, jobs and businesses could be affected. Do consider how your net assets should be sufficiently liquid, i.e. in cash and money you can withdraw at short notice in case of emergencies. Most personal finance books advocate 3-6 months of expenses as your emergency fund or liquid funds for situations like this.
If you are in a net liability position, it’s not all bad if your main liabilities are your housing loan and car loan as these tend to be longer term loans at interest rates that are still affordable. However, if your net liability position is made up of unsecured credit, i.e. rollover credit card and personal credit card balances unpaid, then you should strive to pay them off as soon as possible.
This is because in times when the economic outlook is pessimistic, companies and businesses may lay off staff as it can be seen in the investment banking sector in Singapore where some banks have started to cut back on staff. Living within your means by not using unsecured credit for consumption is one of the most important personal finance principles to practice faithfully if you want to be financially free eventually.
Holding on to your job now is more important than ever especially if you have not finished paying off your housing or car loan. Focus on keeping your job and continuing to protect your means by keeping healthy and a positive outlook despite the gloom and doom that pervades everyday sentiment.
Growing your means is still possible and to some extent even more important now than ever. One of the reasons you should consider growing your means is to provide even more savings to channel into your emergency fund. In addition, if your alternate source of income ever becomes successful enough to be a replacement to your primary paid employment, then you can even consider doing it full time if that makes you happier whilst providing food on the table and a roof over your head.
Darren Rowse of the Problogger fame did a survey and noted that many people did make money online through other activities besides blogging. Thus, you may want to consider these as a hobby to grow another source of income even as you make yourself valuable to your current organisation.
Many pundits say that the financial crisis that appears to be triggering global recession is just the start of a bearish period for stocks, asset prices and economic growth. Let’s live to fight another
day because so long as you have breath, your health, your family and your wits around you, you can survive and thrive!
Be well and prosper.