Start Investing Archive
Recent articles:
• Nobel winner unearths 5 common investing mistakes, 11/4/2002
• Why planners now say: Simplify and forget it, 10/21/2002
• Leaving the fast lane is harder than it looks, 9/9/2002
More...
| | Start Investing
5 ways to recession-proof your life
This economy is not fun to live through. But while everyone else is hiding under the bed, its time to examine your opportunities.
By Harry Domash
Its deju vu all over again. Thats my favorite Yogi Berra-ism, and thats the way this economy feels to me -- just like it did a decade ago when the music stopped for the first time for baby boomers.
With pockets of the country in steep recession 10 years ago, boomers fretted that their careers would be short-circuited. Savings crumbled along with expectations. We were hunkered down in houses and apartments that we couldnt sell, holding on to our jobs for dear life.
Maybe theres something we can learn from deju vu when it happens all over again.
We are told we're in an economic recovery, but it just doesnt feel like it. A New York Times/CBS News poll found that American workers are more anxious about the economy than at any time since 1993. Slightly more than half of those polled said they were very or somewhat concerned that in the next year they or someone in their household might be out of work.
The Wall Street Journal ran a piece advising parents to scale back college plans for their kids, adding an inexpensive state school to the list.
I see plenty of anecdotal evidence of the slump, too. Friends in New York who send their children to an expensive private school are now looking for a junior college because Mom got laid off on Wall Street. The gym I go to is nearly empty. No one has joined our tae kwon do school for a year. My husband and I get a call about once a week from a journalist who has lost a long-time position at a newspaper or magazine wondering if we have any job leads.
It's time to examine your opportunities
Im afraid we boomers didnt learn our lesson. I have a friend who spent nearly $500,000 remodeling her house last year. Now her business is off by almost 70%. Another couple says all their kids college money disappeared in the tech crash, and they wonder if theyll ever be able to retire. This time weve got Gen-Xers and Gen-Yers in the soup along with us.
But lets not get grim. When everyone else is hiding under the bed, its time to examine the opportunities. Here are five things to focus on:
1. Clean up your balance sheet. Youre heading for financial trouble when you find yourself charging for necessities, shifting payment habits, using a credit card where you used to pay cash, making only minimum credit-card payments, reaching card limits and finding yourself with no cash reserves and no savings cushion.
Shop for a low-cost credit line, pay down your debt, build a cash fund and check your disability and life-insurance coverage. Sit down with your partner or family and talk about tight money and what you might do about it.
2. Think ahead. A psychiatrist friend tells me that if you are resourceful, you will emerge from this crisis ahead of the game. Thats because the recession forces you to think about everything youve done, what youre doing now and what you want for yourself and your family. It can be a valuable opportunity to review your perspectives, your options and your values -- and to rearrange your priorities.
3. Consider a career shift. In 1990, one of my high-powered Wall Street friends who loved to visit Spain asked her Spanish client for the secret to the unhurried pace and rhythm of life there. Her client responded: In the U.S., you live to work. Here we work to live. After an epiphany, my friend bailed out of her fast-track job and set up her own consulting business.
Maybe a downturn is not the best time to pick up business. But its a great time to lay plans, to think about where youd like to go from here and what you could do to recession-proof your life.
In the early 90s, my husband and I were in Manhattan with two young kids in private schools and a monthly maintenance and mortgage payment that would knock your socks off. We vowed that when we got the opportunity, we would find a way to cut expenses and live more simply.
4. Remember that everything is cyclical. In 1991, when Bostons high-tech corridor was hit by recession and the unemployed could neither find work nor sell their homes because of the real-estate slump, the economy in Houston was picking up steam. A recent story in the New York Times showed that while Augusta, Ga., lost 5,000 jobs in the last year, nearby Savannah gained 3,400.
Look around. Its always a good time to invest in some training, take some classes or think about your ideal location. My husband, who is a journalist and consultant, recently completed the two-year course to get the Certified Financial Planner designation. We should always be creating more options for ourselves.
5. Develop a skills portfolio to go. During the last recession, I interviewed Charles Handy, a management expert and author who taught at the London Business School. In his book, The Age of Unreason, he argued that the structure of the workplace was changing dramatically. I hope you wont look for a job, he advised his own children when they graduated from college. Look for customers. If you have saleable skills, you can always work.
Handy, who began his career as an oil executive, divided workers of the future into three groups: managers and technicians who run the companies; unskilled clerks and laborers; and creative people and designers who work on a contract basis for the company. I think the third category should be your goal. Most of us will be working longer; it would be nice to be doing something we enjoy.
Handy offered a tip for those who wanted to reinvent themselves: Go to 20 people you know and ask each to tell you one thing you do very well. An unemployed advertising executive tried it and was told that he was very creative, good at organizing teams, presenting ideas, leading people, selecting wines and recalling historical details. This guy set up a business taking people on tours of battlefields and other historical sights and vineyards in Europe.
It wont do to ignore the reality of a slumping economy. In this environment, you can get ahead by re-examining your life and making smarter choices. As Fritz Mondale told his hastily organized campaign workers after they lost their six-day senate race in Minnesota: Often in life, you learn more from the defeats than from the victories.
|
