Here are five important debt recession lessons you can take away from this recession to make your life better and more prosperous in the future:
1) Eliminate Your Debt - many people were needlessly hurt by this debt recession because they had too much debt when the economy turned bad - debt elimination is essential. Debt is easy to acquire but hard to pay off and it can be a heavy weight around your neck when money gets tight. When you are barely treading water the extra weight of debt can drown you. So if you want to avoid putting yourself in such a vulnerable position financially make a commitment to get out of debt and stay out of debt now. Your financial needs can be greatly reduced when you are debt free and that means you can more easily survive temporary cutbacks and lay offs. Debt elimination is tough, but most certainly possible. If you need help, try looking into a debt elimination program
2) Have an Emergency Fund - one of the biggest reasons people don't build more savings is because they are carrying too much debt and have no money to save. Once you are out of debt, build an emergency fund equal to 6 to 9 months of living expenses. That way you will be prepared when the next financial crisis occurs (and it will occur.) If recent history has shown us anything about our economy it is that cycles of growth and recession are continuous. Every period of economic growth is followed by recession and if you aredebt free and have sufficient savings you can weather the storm. So get out of debt and then save, save, save.
3) Invest in Yourself - the stock market can be risky business and if you have money in a 401k, or any other qualified plan, you have seen firsthand just how risky it can be. Before you go throwing darts on Wall Street why not take some time (and your money) and invest in something you have more control over...yourself. Benjamin Franklin once said: "Invest the coins from your purse into your mind and your mind will fill your purse with coins." A small investment in your financial education and skills can pay a huge dividend in income.
4) Diversify - If you want to insulate yourself from the devastation many people experienced when they lost their jobs you need to diversify your income streams. If all your income is from one source, what will happen when that income source dries up? Being totally dependent on one source of income is dangerous at best and this economy has shown just how vulnerable an income source can be. While I am writing this, General Motors and Chrysler are dropping their dealership contracts with thousands of dealers across the country. Some of these dealers have been with them for decades and never imagined that income stream would be shut off. But it has, and it has left not only the dealers but their employees as well hanging out to dry. It wouldn't be so hard to accept if they had diversified income sources and weren't solely dependent on GM.
5) Gain an Entrepreneurial Spirit - in the nineteenth century the majority of Americans were self employed (or entrepreneurs). Whether they were farmers, ranchers, sheep herders, or trappers their security was based on their own hard work and wits. It was this spirit that built this country. However, in the twentieth century the industrial revolution brought big business and people moved in to towns where they took jobs that promised "security." The concept was simple, work for a large company and retire with a pension. That security was real, for a while, but it is an illusion today. Large companies that were once considered too big to fail are dropping like flies. The world and the economy have changed and you need to change with it if you want to survive.
It's time to reclaim the entrepreneurial spirit that built this country. You don't have to quit your job, you can start a part-time home based business if you want and keep your job in the meantime. Everywhere you look you can see this spirit catching on. In fact over 60% of all the businesses in the U.S. today are actually home based. However, be careful before you buy into some "get rich quick" business opportunity. Instead find a business you can start for little or no money and invest your time rather than money to get it going.
These are just a few debt recession lessons that can be learned from this economic crisis. Remember, "It is an ill wind that blows no good." Don't let the lessons from this bad economy be lost. If you heed them you can make sure that all the struggle this meltdown has caused was not in vain and you can look forward to being better prepared for the next storm.
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