The world economic crisis of the lat 5 years has revealed much about the vulnerability of the middle class in withstanding financial crisis. Economic crisis typically results in loss of jobs, slash in salaries and wages, austerity and inflation. Whilst there is no special way of managing financial crisis in an harsh economy the following are suggested ways of helping;
1. Prepare a Family Budget – Family Budgets may sound mundane but in an harsh economic environment they are live savers. A break down of what you spent in the past month is a sure way to project what the subsequent month will look like. By the time you are done, a clearer picture of what you spend on the most will be revealed.
2. Have a Steady Source of Income – Off course you can’t survive a harsh economic without a steady source of income. If you do not have a job then you must be self employed. Your budget will guide how you manage your income such that if your are running a deficit its either you increase your income or cut down your expenses.
3. Get an alternative source of Income – An alternative source of income is very crucial to survival in an harsh economic environment. Nothing wrong in earning an extra Naira doing some business by the or trading in the stock and money market.
4. Avoid Lending – Because everyone is struggling and cash is hard to come by, the rate of borrowing is usually borrowing during harsh economic times. As such, it is important you avoid lending money to people because the likelihood that you will be refunded is very low.
5.Avoid Stashing up debts – As mentioned above, things are pretty much tough during harsh economic times and it may be tempting for you to want to borrow to augment your finances or purchase an asset. If you must borrow then exploit borrowing from family, friends or your office. Bank borrowing must be your last option.
6. Save 10% of your Gross Salary – Savings in harsh economic can be quite onerous however it is very important as the nest tips will show. At least 10% of your Gross Salary (not take home pay) should be saved every month no matter what. This requires a high level of discipline and perseverance.
7. Invest – Harsh Economic Times always produces investment opportunities and incentives. Share prices, bonds, etc are usually cheap at times like this presenting once in an economic cycle opportunity to buy. The upside is that you sell for a good profit when the economic has regained momentum.
8. Search for great deals – Just as investment opportunities are available in tough economic times so are great consumer deals. Companies are loaded with pile of inventories they want to dispose off and will go as much as selling them on a cheap. You should scout for discount deals in the papers, Tv, radio etc. These days we have websites in Nigeria that offer deals. You should get familiar with them.
9. Avoid Expensive Assets – Expensive assets are assets that produce little or no income but generate huge maintenance and running cost. A light bulb is an example of an asset that generate high operating cost by adding to your light bills. Energy saving bulbs are better suited. Expensive fuel guzzling cars are another example. Generators that may be cheap when bough are sometimes very expensive to maintain.
10. Sell Unwanted Assets – Following from above, if you have assets that are a financial drain to you then sell it. I remember a friend who had a car that he kept repairing. At the end of the month he realised he was spending more money on fuel and maintenance than he would have had it used public transportation. Off course he sold it and went for Public transport