I talked to one of my MD clients yesterday. She’s an OB/Gyn in what I would consider an affluent area.
The news she had about what’s going on was staggering. Almost half of the patients her practice now sees have no way to pay her.
That means offices and clinics will close.
And slowly we’re seeing other businesses close down or just not open again.
Make no mistake, we’ve got an economic storm coming. Whether it’s a recession or a depression, we don’t know yet.
Either way, there are things you can do right now to get yourself ready.
1.Establish and build an emergency fund (recommended by 84% of CPAs surveyed)
For years, we’ve been told to have 6 months of regular expenses saved away. Now, the number has been increased to 3 years. You might be wondering how on earth you can save money when you’re facing the economic challenges you are now.
I get it.
There will always be expense and there will always be emergencies. Right now, it’s time to get serious about what you need to have ready in case things get worse.
Cut your expenses and start saving, even if it’s a little bit every day.
2.Pay down high-interestdebt& short-term cash outlays.
Replace high-interest debt with low interest debt, or simply pay it off. Get rid of high cash flow outlays and replace them, if necessary, with long term debt with smaller payments.
3.Lifestyle and spending priority considerations
Instead of spending money, invest it. Look at everything you do as either something that takes cash out or puts cash in.
This past year, I had a choice between finishing up a project (with cash) to create a rental unit or buy a new car.
One put cash in my pocket. One took cash out.
Which would you choose?
4.Recession-proof yourcash flow
Financial planners will tell you to recession-proof your investments. It’s more than that. Recession-proof your cash flow.
You can buy things like precious metals to protect your wealth, but it doesn’t help cash flow. It’s not a bad idea, but just remember to keep the cash flowing in. An asset like precious metals doesn’t provide cash flow. You have to sell it to get the cash. So while you’re building that, build cash flow too.
My two favorite ways to build cash flow are rental properties and online businesses.
5.Create a ‘crisis’ budget while in a financial distress
Get serious about what you really need. It’s probably not a latte or a new pair of shoes. Cut your budget to the bone. Build an emergency fund. Make the money you spend pay you back.
And I’ll add one more. Start a business. You can have a blog going inside of a week and if you work diligently, you could have something making you money steadily within 4 months.
Yes, you have to work. But who wouldn’t want another couple thousand dollars a month?
We’re in some pretty exciting times right now. Some people will get rich. A whole lot of people will go broke. How are you doing?
The More You Know, the Better You Can Plan.