Book of Wise Investors

The situations are really not very pleasing to the eyes out there. Stock prices plummeted, many retrenchments across various sectors. People started to become more religious which may be a good thing.

To average Joe on the street, key thing on their minds is keeping finances in order until things are back to normal.

1. Aware of your cash balance

By right in the first place, you should record down on paper the monthly income and expenses. It is even more important now to do so since at this time comparing to a few years ago, there is a higher statistical probability of you being retrenched. Not only that, most companies has already freeze hiring. In other words, after being retrenched, there is also much greater difficulty in finding another job.

The general advice in this area is always stacking around 6 months of your monthly expenses.

2. Home loans and mortgages

This is where it requires some thinking and knowledge in real estate finance. With an expected steep and prolonged recession ahead, Central Banks all around the World is slashing interest rates; as a result, short term interest rates are expected to stay low for the entire year ahead.

This basically translated into substantial savings for those on variable loan packages.

3. Usual Credit Card Debt

The unfortunate thing is that the good times experienced just more than 1 year ago resulted in some, if not most individuals into bad habits arising from complacency, which is not paying credit cards bills in full.

Everyone knows that credit card debt is of of the most expensive loan and most still ended up contributing to the wealth of those that are already very rich – major shareholders of major banks. That is not wise which I sure most will agree.

The economic crisis brings a good time to tighten your wallets and pay off these consumer debts as soon as possible.

4. Consolidating debts

People nowadays not only have many other problems but also many debts, which eventually create even more problems.

Debt consolidation is a must if you have outstanding balances with credit card companies here, there and everywhere. In 99.99% of the cases, people will have difficulty paying off.

5. A good time to review insurance policies

If you are going to retrench or have already being retrenched and doing nothing at home now, this period will be a good time to thoroughly review all your policies.

One very important task that you must do at these times of uncertainty is to ensure that the hospitalization policies are in force. Medical bills are sky high these days due to medical students being the brightest in the country and expect higher pay, if not; they will give up practicing medicine and become an investment banker.

With giants like Lehman Brothers, Fannie Mae and Freddie Mac collapsing, what makes you think that the company you work for will be there the next day?

Depending on company’s insurance coverage is a serious mistake.

6. Review your investment portfolios

As I said before, since you are already doing nothing at home now or are going to soon, you may as well think about whether there is a need to restructure your portfolio.

Equities are now like having a closing down sales. By selling fixed income instruments like bonds and redeploying the sales proceeds into stocks, one really stands a good chance of making a handsome returns a few years down the road.

With the low Central bank interest rates now and possibly in the months and years ahead, global money supply will eventually increases, leading to a recovering economy and stock market.

7. Investment Checklist for ordinary people

Warren Buffett has an investment checklist when selecting stocks but his is going to be different from us average Joe on the streets. He once said that diversification is for birds. We practiced diversification because we all are birds when it comes to money.

Even you are planning to enter the stock or property markets now; you should ensure that the money is well diversified across different asset classes, nations and sectors.

The rule of thumb is dollar cost averaging – buying into the stocks via a fixed sum at regular time intervals because no one can time the market and you don’t want to spend your life watching the tickers.

In the long run, stock markets will always go upwards, reflecting the growth of the economy.

8. Becoming recession proof instead of prepared to be retrenched

No one in the right mind is going to lay off an Olympic performer in his or her job.

Going the extra mile by doing more other than your basic responsibilities, upgrade your skills by taking related courses to your profession and of course, be it in businesses or as an employee, networking and creating a good working relationship is essential as well.

9. Learn cooking

This is like killing 2 birds with 1 stone. Previously you may not have time to cook for yourself at home, now you have been retrenched or simply want to cut costs by cooking own food instead of buying processed food.

Along the way, a new skill is learned. Instead of going for a cooking course, experiencing the learning and trial and error process of it together with your spouse is, in my opinion, a wonderful experience.

10. Count your blessings and be grateful

With or without recessions, you are still 10 times better than someone in Africa. At least you have a roof over your head and food on the table.

Reflect upon these facts and you will feel more abundant and grateful.

Related posts:

1. 4 Tips for those out of work
2. All the interest rates that everyone needs to know
3. What is investing and what is not investing
4. Why one should not fully pay off mortgage for primary residence