As we all know, economic downturns are going to happen in our lifetime. There are many types of events that happen that can change your economic situations like a trade war, pandemic, a stock market crash just to name a few.
I’ve been through a couple of economic downturns in my lifetime and many of them were hard times that came to me by events that were out of my control. I have some actionable advice to take so when the next economic downturn happens you know what to do.
Figure out your monthly overhead
First, you have to make sure you’re stable and figure out your absolute necessities in life. Double-check your monthly overhead and see what you really need and cut anything for the time being. Don’t increase your purchases on things you don’t need. Keep your expenses low during this time of uncertainly. Overall, I want you to ride out this economic downturn. The economy will recover and you want to be in a great position when it does.
Keep your composure
Don’t panic when an economic downturn happens. It’s very easy to panic and give in to fear and purchase things you don’t need or buying too much of something due to the fear of scarcity. When you go to your local stores, you’re going to see people buying in big quantities. Don’t panic, our supply chain for our food and other needs are so great that the worst-case scenario is that a certain item is out of stock for about a week.
Be careful about where you get your new stories and information
Be careful where you get your news and your information. You want to make sure you get your news from reliable and credible sources. Do not give in into sound bites and headlines. When you live life only paying attention to sound bites and headlines, you never get the full story if any at all. In an economic downturn, there will be a lot of sound bites and headlines due to the situation.
Stay positive
Always be in a positive environment. In a time of uncertainty, it is very easy to be negative or worry. Don’t feud with your family and friends over a sticky situation. The economic downturn will end at a certain point but once you lose out on friends and family often times they are gone for good. So, try to comfort one and another and be there for each other for moral support.
Cut back your expenses
Find out how much money it takes for you and your family to live daily. When you find that daily number of how much it costs you to live, you’ll find ways to cut back to meet your current financial condition.
Set new goals after the economic downturn. It may be hard to plan for the future when you are worried about you today. Trust me, the economy will recover and you want to reach your goals when it’s time to bounce back. Think about what you could do today to make your future make more sense.
Would you like to be able to get up one morning with your family and take a trip anywhere in the world or wake up in the morning and if you felt like buy some high ticket purchase you can do so without having to feel any remorse or second thoughts because it was your mad money?
You’re probably asking me “Robin, what is my mad money?” Your mad money is your discretionary income that does not interfere with your daily life.
Now, when you go to a bank or a lender they take your mad money and think that money is for paying debt and bills. I believe your mad money should be going towards your fun. Just like that trip you can go with your family or some other purchase for pleasure.
I have a story that relates to mad money.
I went to Disneyland with my granddaughter. We were having the time of our lives going on different rides and have an experience of a lifetime. So, we’re in line for one of the rides and there’s a group of young 20 something girls or they could have been in their late teens. I overheard their converse and one of the girls was freaking out about her money. She checked her checking account and she saw that the money for her car payment was going to bound. She used the money that was supposed to go to her car payment for this trip to Disneyland. This was not her mad money. This is the money she needed for her monthly bills. So, mad money is money that you can spend every month that will not affect your daily life. Mad money is money you can use at Disneyland without having any fear or regret. I don’t want anyone to be in the position that girl was in with money. Here she was trying to have a good time at Disneyland with her hard-earned money with her friends but that car payment is going to be in the back of her mind throughout the day and I don’t want anyone to be in that position in life. I thought to myself if this girl read my book, The Common Sense Guidebook To Mastering Your Money she would have found the value that would have corrected her money habits and she would have been able to go to Disneyland and still have her car payment paid. I guarantee that you’ll find some gap to fill with your money habits in this book so you don’t be the girl at Disneyland worried at Disneyland and you’ll be the person at Disneyland having a great time and has everything covered and having the mad money to have the daily happiness.
If you want mad money and want to have some fun with your life without the worry about money, it’s best to know what mad money is all about on page 86.
We can all agree that starting a business is a lot of work. The end result of business we all strive for is simple but getting there is the hard task. There a way around this, you can streamline your processes so you only have to make a few decisions a day to improve the quality of your workday. When you have the systems and processes in place. Having your business working for you and not you working in your business.
One thing that many business owners do not take account of is managing their personal life. The day to day decisions you make in your personal life affect your business life as well. If either your personal or business life is in chaos then the other can not be simple. Make an effort to take a grip on both aspects of your life. It’s not an easy task but it’s required to be successful.
Before you give up or start on your business. You have to do your research. There are many questions you want to be able to answer if you want to be successful:
Who is your target marketing?
What are their needs?
What do they want from you?
Also, when going into business ask yourself these following questions:
What is my passion?
What do I do well?
How can I bring my passion to the forefront?
These past three questions will determine what products or services you should offer to the world. Business is going to be hard and it’s going to test you. If you’re doing something that you love and you do well, it’s going to increase the chances of you staying on the path and grind through those tuff times.
Don’t just start a business out of the blue and off of a hutch. Most people that do that will not be successful. That is taking a shot in the dark. You need to do your research and have these questions answered. These answers are proof of the concept that your business idea could work.
When I started my bookkeeping company, I knew there was a demand for the service because I started my business with a few referrals from people I knew. Not too many people thought of outsourcing their bookkeeping back in those days. I was one of the few people thought to do so.
During this time of starting your business, how are you going to support yourself? Are you going to be able to fund your business while still supporting your daily lifestyle?
Just because you start a business doesn’t mean your bills are going to stop coming in. So, because you make a big jump and take the plunge, make sure you have the financial means to fund your business.
When you do start your business, do you have the right business structure in place in terms of taxes and legal? Here are a couple of questions to ask regarding this:
Do you have a business bank account and credit card?
Are you able to separate your personal and business finances on paper?
Do you have all the legal business paperwork due for the state, local, and federal government?
If you reached this point, you’re probably asking now “how hard should I wait to assess myself if I am successful or not?” This is a very good question. What I tell every business owner that is going into business is that you need to be going at it for two full years to determine if you’re successful or not. You need to give yourself a time frame of two years before you can make an assessment of your business.
All these questions tie down to four things. Research, prepare, structure, and timeline.
These questions are just part of the first battle. Next, once you have all these questions in place. Be prepared to put in a lot of hard work. There are going to be long days and long hours. There will be self-doubt. If you’re able to put in the hard work to answer these question then you’ll be in a great position to be successful in the long run.
Here are some boundaries to have in your personal finances to keep more of your hard-earned money.
Boundary 1
If you know you’re in an emotional state of any kind (good, bad, happy, sad, etc.) do not spend any money. When you’re emotional, you are very prone to buying something you don’t want or need. Emotional spending goes hand to hand with regret. The best thing to do is to take money out of the equation and figure out why are you in the emotional state you are in and work through it without spending any money.
Boundary 2
Put some distance between you and your money. Put some barriers between you and your money. For example, if you see something that you want online, put your debit card in another room. Another example, don’t take your debit card with you when you go out and carry a set dollar amount of cash. This slows down the emotional spending
Boundary 3
Research what you are buying. Researching what you are buying will do a couple of things. It can solidify what you are buying, you may find another product out there you like better, you’ll find out if you really need or want that item. Research takes out most of the emotional spending away. Once you are at an emotionally stable place, you’ll be able to make a much better decision. Also, this can prevent buyers remorse.
Boundary 4
Be aware of your own issues before you go out and buy something. Focus on yourself and your triggers. What past experiences in your life caused your money spending habits. Often times, you’ll not even notice your triggers.
So, one of the toughest topics that I want to tackle and I don’t know where the future is going on this topic of medical insurance. I really think it’s a misnomer to call it health insurance, it’s almost like sick insurance, people don’t use their insurance to be well. They use it in times of trouble and emergencies, in a situation where they feel really ill and they haven’t been to the doctor in a few years.
People aren’t using their medical insurance for health, they’re using their medical insurance when they’re sick. People are afraid to go to the doctor because of the bills, they’re afraid to like rack and stack a bunch of medical bills and then not have an answer. So, what’s happened in this country is that people don’t go to the doctor for wellness.
The important part of this situation is that is medical insurance costs us too much money it takes a big chuck out of our paycheck every month and we don’t see to get the coverage we used to. I can give you an example back when in 1980 when I had my youngest child he was born prematurely by 111/2 weeks he was in the hospital for a long time. We had great medical insurance I think it was through Prudential I don’t know if Prudential does it anymore.
Our bill was $30,000, 3 weeks no 6 weeks stay and all of his ophthalmologist and specialists that came to see him at the hospital and he was there 6 to 8 weeks and went from 21/2 pound to 41/2 pounds and came home. But the bill was $30,000 I had an emergency C-section, of that entire bill we paid $600. Now they audited that bill and they kept us on the phone making sure that every med that they had on there he got and everything service they said was on the bill that he got.
Once it was all done it was 30 grand and we paid $600, there’s no such thing anymore, even with good coverage having a baby you’re going to put out of pocket as much money as 3to 4 times money that I put out to pay for my daughter when she was born with just $3000 cash there’s no such thing anymore and people are afraid.
So, I’m going to explain really quickly this may be a 2 partner I’m going to try. You need medical insurance, medical insurance is supposed to cover that catastrophic illness you may have. In the old days, there was a cap on the catastrophic illnesses in the Affordable Care Act, they can’t cap you. So, let’s say you have a cancer situation where you reach a million dollars on your deductible or partial deductible you’ve reached a million dollars.
They can say to you okay, we will no longer cover, anything for you in your health care. So, if you had AIDS, which a friend of mine did, he had AIDS and he reached his million dollars and the insurance company canceled him, and his brother who was a very powerful lawyer went and fought and said no you can’t continue his health coverage.
So, let’s be honest the insurance companies have always been in charge of your medical care they don’t want to put out for sick people. They do not want to cover you if you are ill, they want healthy people only. Back in the early 90s, I applied for insurance through Kaiser and I had fibrocystic breast disease which is benign breast tumors. They wrote me a letter and said you’re not the kind of person we want on our health care.
So, I was refused insurance back in the 90s because if that particular illness, might have been a little later than the 90s I’m a little blocked on that but I didn’t get health insurance from them they refused because I had a preexisting condition. What are preexisting conditions when you apply for medical care? Anything that they consider to be something that’s life-threatening or dangerous or expensive they can turn you down because of it.
So, let’s say you’ve had a mild heart attack when you were 42 and you’re now healthy in 46 in the old days and possibly coming in the future they can say to you no, you had a heart attack we are not giving you insurance. Or if we give you medical insurance we are excluding anything that has to do with your heart.
So, there are millions of people, millions and millions I can’t even tell you how many that have existing conditions that medical insurance can turn you down for. Diabetes, heart disease, kidney disease, female problems, breast cancer, prostate cancer, urinary tract cancer, there are throat cancer, skin cancer.
They have been giving the go-ahead in the past to deny you coverage for any of those things when the Affordable Care Act came through it said hey! Do not discriminate against preexisting conditions and that’s where the rub comes in, everybody’s premium went up higher, why? Because what the insurance companies did is built in a little bit into each person’s premium and amount to cover preexisting conditions across the country.
So, maybe I don’t have any health conditions but I would be paying for someone who has diabetes, someone who gets pregnant somebody who has a heart attack. It’s built into my premium it’s not like mine record my health record gives jump up on health insurance premiums. They do it by age so they will say gosh! I was 39 I turned 40 and my health premium went up, why did my medical insurance go up? Well, you’ve now entered 40 the 40s are where these medical problems show up so they charge you.
When I turned 50 years old, oh my gosh, my premium went up 27% why because you’ve now entered the premiums for 50-year-olds who now start getting diabetes and for sure strokes, heart attacks. Then you’re like me you enter your 60s and when you enter your 60s you’re not considered a problem so your health insurance premium even goes higher.
So, stop thinking it’s like auto insurance, where oh! I haven’t had any accidents or tickets so my insurance premium is low. They still charge you auto insurance by your zip code. So, when you have your auto insurance and you live in zip code 90066, and 90066 has a lot of car thievery and burglaries and stuff your car insurance is going to be fit in with all the people that live in 90066 same with your health insurance. It goes by your age and where you live and what health insurance cost in your area.
I have talked to so many people and I feel that they’re very naïve about how medical insurance works. It is not about oh! Well I never had surgery and I’ve never had a heart attack and I’ve never had this or that no, based on where you live and your age you’re paying for everybody else in your age group and the fact that there are risks all of the medical insurance is about risk factors.
We need to understand that when we are debating the medical insurance premium issue and what health care will really cover I am saying that health care should cover you to be well. You should get regular checkups, everybody in this country should have blood pressure, affordable blood pressure machine to check their blood pressure.
If their blood pressure is continually high and even a resting blood pressure which means even sitting at a desk with your feet on the floor and your arms open, palms up and you are sitting there for 5 minutes very calmly breathing and then you take your blood pressure. If it’s high when you do that, you should be at the doctor but most people won’t go.
So, I think that the health insurance issue is going to be the biggest issue in 2017 and I want to be able to explain it I want to be able to get people on that can help you make a choice and I want the American people to be healthy happy and using their insurance the right way. The fact that you can’t afford it makes it the biggest issue around, be healthy, be happy to know what you’re doing understand how it works. We can do this together I promise, I’m 65, I’m on Medicare and I’m finding out a lot so go on this journey with me.
When you become an employee of a company they hand you what is called a W4.
The W4 is what determines how much tax is taken out of your check based on if you’re single, married with 2 dependents, 4 dependents, or no dependents…
They want you to fill out your name, address, social security number, and pertinent information to determine your tax bracket.
The highest tax bracket is single 0. If you’re a single person and you have a job with a company that pays you a W2 and you say I’m single and I have no dependents.
They will tax you as though you’re carefree and fancy-free and they will take the most tax out of that. Most people take a single 0 on their W4 so that they can get the most amount of tax taken out. Then the next year they file their taxes and they get a whole bunch of it back and they feel like “oh! Look I just got $4000 in taxes back.”
So, what are you saying when you get your $4000 back of the $10,000 you paid into tax? You are saying you let the government hold onto your money all year long when you could have been living off it.
So, I usually advise that you take a single 1 and then if you feel you’re going to come in short… use a tax calculator and find out if you need to do single 1 plus an additional $50 per pay period, that’s better than doing single 0.
People ask me all the time, why do they get to determine how much tax is taken out?
Well, they don’t really, if you do your homework and figure out your taxes with a tax calculator… you might find out that you don’t owe as much tax as you think.
So, I’m going to encourage you to be more proactive about your W4 before you just put single 0 hands it back in, look at what it says, ask yourself “do I want to give the government more money all year and then get it back in April, or do I want to take my money and use it every month and maybe pay down expenses with it?
You’re in the business of life. If you’re getting up every day hitting the ground running accomplishing things during the day even if it’s just keeping your head above water you are a business person. You are in charge of your life and probably along the way you’ve taken on a partner, a husband or wife, children, aging parents, and best friends.
You are in the business of life and nobody addresses that, nobody addresses how successful you are when you get up every day and make that day work. Even if at the end of the day you say that was the crappiest day I’ve spent in a long time… but I did my best. Then you are wonderful, you are running your life. I think we have this idea that if we are wealthy we are happy and if we are poor we are unhappy.
But the truth is we can be just barely making it and be one of the happiest people on earth, why? Because we’ve surrounded ourselves with people we love, and we are figuring life out through trial and error. Let me give you an example a young teacher gets out of school… she has some school debt but she gets up every day and in the lives of her 3rd graders she is the most amazing, most important person from 8:30 in the morning till 3:00 in the afternoon.
She is a successful person, she is in the business of teaching children.
And that’s true of a nurse, of a stay home parent, of a student who goes to school every day and tries to do their best at school even if they have a cold, a headache, or even if they’ve had a fight with their best friend but at the end of the day they did their best.
You’re a successful human being and you need to surround yourself by people who think that as well.
