How to survive the coming Recession
From Hypo Global
What a difference a year makes! At the beginning of 2008 the “Western World” acted in an what we will one day reflect on as an insanely over-confident manner within an environment that at the time seemed stable in terms of global markets, where there was a worldwide sense of being comfortable with the concept of Globalization and the notion of perpetually rising property prices. The false calm of financial security built on the strength of credit consumer optimism amongst the western masses progressed relentlessly and assumed this boom would last forever!
At precisely this time I dreamed up the concept of my humble little Blog “Hypo Global”. With profound respect for global financial history and my personal experience concerning the horrors of “Hyper Inflation” in Latin America with dramatic “Booms and Busts”, for me the writing was on the wall! After all, the original statement of Hypo Global was “If you ever wondered what Utopia is like; Don't because you are living in it now! My my, how things will change.
And so with dramatic speed of events unfolded during the second half of 2008 and the world changed what appeared to be over-night! It all started with the sub-prime mortgage crisis in the US, which gained traction and mutated into a “Western World Credit Crunch”. Today it has evolved or better described as snowballed into a “Worldwide Banking Disaster” and the worst recession since the Second World War according to the International Monetary Fund.
Globalization went mad in the new Millenium, compound errors ensued across the Planet, as share prices were bloated on easy money gained by risky credit, producing unsustainable profits. Over-outsourcing occurred and the planet became Hypo Global! Its likely that we will now witness the exact reverse scenario, as the pendulum effect comes into play and countries return to “Focus Local”.
Either way, whoever you are reading my humble article, you will now need to prepare to survive the recession long before the effects of Global Warming kick in. Jobs will become scarce on Planet Earth and many of you reading this article may yet be laid of in 2009.
So to the meat of the article; here are some Rules and Tips of how to survive the coming Recession, which I trust you will find useful…
Rule 1 – Start accumulating and stop consuming
Identify opportunities to save. Even though interest rates are coming down from the US to Europe, liquidity is the key, so keep your cash. Considerable savings can be made by changing a few of our day to day behaviors and habits.
Are you actually using that Gym membership to full value? Perhaps running or cycling on the streets could be just as rewarding and/or effective? All you need to do is 20 - 30 minutes a day for at least 3 days per week to help keep the pounds off, stay healthy (another good investment) and protect the Dollars, Euros or free falling Pounds in your pocket.
Don’t buy your sandwiches, make them! Get up earlier in morning and make them for your kid’s lunchboxes and your work. By making my your own, rather than buying them, around 5 euro per day can be saved, which equates to over 100 euro per month.
Satellite and cable packages! Think about what channels you actually watch and what you don’t. Most providers are now reacting to the climate and offering trimmed down packages.
These days most of us use mobiles more, as opposed to home phones. Talking via the internet and social networking sites will generate the greatest potential saving on communication costs. Also worth considering in some countries is the free minutes with Mobiles, so ask yourself do you really need a home phone? When traveling abroad beware of Roaming and Data costs. Buy a local phone or opt for SIM4TRAVEL.com
Rule 2 – Savvy Shopping
Follow these simple tips and you will save on necessary bills.
Tip i) Supermarket shopping. Never shop on an empty stomach; this is a clear route to expensive shopping. Eat before you execute your main food shop and then your stomach will not convince your brain to buy more food or that item you did not actually need.
Tip ii) Reduce the number times you shop. Every time you shop you are always likely to buy extras or what we call in the business as add-on sales. Retail outlets are professionals in taking your money and Consumerism may well have conditioned you, thus the more you shop, the more your bill increases. Create space in your freezer and cupboard, then fill them completely. Make sure you eat it all or the vast majority before going out again. By planning how much you need, you not only save on unnecessary items but you save on fuel in addition to wear and tear on the car by not popping to the local store. Also you will not need to throw away “Out of date food”, which is anyway a sin.
Tip iii) – Supermarkets are doing more advertising these days to get you in. Think about it; will I actually consume these items, before buying them?” Many people are just used to buying things, which the boom and consumerism conditioned us to do. The excuse is usually because it was a good deal, even though you may end up throwing it or part of it away”. If it is something you really need, then go for it on a separate trip, as this mindset helps reduce the number of times you actually need to go shopping and sorts out the priorities.
Tip iv) – Vouchers and points. These really do work if you are wise and actually make them work in your favor. Collect points at all times and use vouchers in one go and to obtain a greatly reduced bill. Don't buy more just to boost your points, it should not enter the equation. If you use supermarkets, where they offer discounted fuel with your shopping, then take advantage as it adds to the overall saving off your bill. Take care of the cents and the whole Euros will take care of themselves!
Tip v) – High Street Shopping. Go to the Internet first to get an idea for how much you could save by buying online. You can use this knowledge to price match with the Supermarket and confirm whether you should still buy online or not. I know it is harsh and the high street needs our help, but for many, this is a matter of Survival!
If you are purchasing an item of value, shop around, check online, then share the price with the store and ask the store how they can help you pay for it. Interest free deals are a great way to budget. However don’t fool yourself once you have your item or continue the splurge.
Rule 3 – Better Borrowing
If you have debt, review it immediately! Shop around aggressively to reduce what you pay. If you have store cards these usually feature a high APR worldwide from Macy’s to M & S.
Move pending balances to interest free or cheaper deals on credit cards, but beware of the one time conversion fee! Review your borrowing and add up how much interest you pay each month on each respective aspect, then seek to combine debt with one complete credit deal. However, try not to borrow more than you actually need and take it over the minimum time frame you can, to ensure that you pay only the minimum interest. Remember that borrowing more and spreading it over longer period, is not actually a saving, it’s a long term expense and commitment.
Unless you already have pending credit, avoid credit cards and loans wherever possible. If you are looking for new borrowing, the first thing you should know is how effective your credit score is? This will not only determine whether you are accepted, but in many cases how much you will be able to loan and even how much it will cost. A good indication of your score is available from one of the many agencies available on the Internet.
Rule 4 - Emergency Money
Start saving regular weekly or monthly sums and build an emergency fund according to your means, step by step. In the event the worst should happen, you will be grateful. Calculate your saving and then reengineer the money towards the positive. In Switzerland they recommend a complete Emergency long lasting dry store of food and essential items packed ready to go. You never know!
Rule 5 – Track expenditure
Keep a log of your expenditure and review it each month. If you log everything it will open your eyes to the areas where you can make more genuine savings. Review it each month to see what progress you are making.
Rule 6 – Trust with care
When it comes to cash in a recession, if you lend money to a friend, you will likely lose your friend and the money! Don't over trust your bank either, they will certainly not help you when you need it most, especially in the difficult times we will now live in. Its important that you do not put all your eggs in one basket or in this case one bank. Governments were quick to protect banks to cover their failings, in to avoid bank runs in 2008. However, as the recession deepens and Government coiffeurs across western nations come under strain, depending where you are, a bank run is certainly a possible scenario. In such an event at best you will get your money back with no interest after some months or years. At worst you lose everything or part, depending upon the safe-guards of the country or banks you invest in.
Rule 7 – Diversity
If you are lucky enough to have money, don't invest it all in one place! Spread it around, respect long term historic cycles and be cautious. Diversify and make sure there is balance and hedging in your portfolio.
Rule 8 – Hold the right currency
The GB Pound is in danger of going 1:1 parity with the Euro and then perhaps the same to the US Dollar. Traditionally Democrats strengthen the US Dollar and so far the Euro is holding out. In times of crisis Swiss Francs (backed by Gold) is usually a safe haven. Gold itself is relatively safe as a long term investment. There are no guarantees though in such an instantly over reacting market based world, especially so in times of trouble. So again spread the eggs and don't get lumbered with a single currency, especially if it devalues like the Zimbabwean Dollar or the Austral of Argentina in the past.
We will feature more Recession Proof tips in the future, as the crunch starts to bite.
Editor Hypo Global
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San Pedro de A, Malaga, Spain