The Dow has been very volatile lately — cratering for a few weeks, but now making up for massive losses. The Feds are pumping more billions into failing big banks, and bailing out the notorious insurance company called AIG, the financial colossus known as Citi, as well as our greedy automakers. What is one to do in this enormous mess?
Well, I feel that there is so much negativity out there right now that perhaps we should focus on the positive things we can do and try in this terrible economic environment. Here are some actionable things and suggestions for maintaining a cheerful attitude in the midst of gloom.
Image from Terren in Virginia
Positive Personal Financial Planning Strategies For The Down Economy
Positive Tip #1: Are you facing foreclosure? Try talking to your lender.
Focusing on an action plan is one way to take our minds off the difficult stuff. Some of you may be on the brink of foreclosure, but there’s now a lot more willingness on the part of lenders to negotiate a lower payment. Lenders are finally understanding that it is better to receive less money per month than to put homes on the auction block where the bank will most likely lose a lot more cash. It’s about time that common sense finally prevailed.
So go and talk to your lender immediately if you are having trouble paying the current mortgage and discuss possible housing assistance programs and options. Ask them to show you the original contract you signed with them. Your loan may have been repackaged so many times that there’s a good chance that your lender will take a few months before they find your original contract. That will give you a chance to work out a plan to settle the renegotiation.
Positive Tip #2: We’re in a bear market. Time to buy?
It’s easy to feel badly about our investment losses in this bear market. But many others view it as a great opportunity to start accumulating quality stocks at excellent prices.
I recently had an epiphany when I checked the recent price of GE on the stock market: $7.41, down from $38.52 not long ago. I use GE as an example of an American icon gone south. It crossed my mind that I can afford to buy $5,000 of GE stock right now and if it goes back to, let’s say, $20.00, I’ll have almost $20,000 in a couple of years.
I would certainly hesitate to buy GM even at $1.68 per share amidst all the talk of bankruptcy; but with GE, we are talking about a company that has undeservedly fallen prey to this bear market. It was valued at $410 billion in 2004 under the magic eye of Jack Welch, the iconic CEO. GE makes thousands of products for the American consumer and for the government. How can it disappear into the recession maelstrom? Is this the right time to buy this stock?
Positive Tip #3: Divorces are expensive. Give your relationship a chance!
Because of this recession, more people are either avoiding or deferring the prospect of a divorce. Why? Well, think about the consequences of a divorce at this time! Because of the heavy financial costs of splitting up, some couples have been rethinking their plans and are instead working on patching things up or giving their relationships another shot. And this may be a blessing in disguise for some people.
But there are also the hard cases, those folks who simply can’t stand each other. So what happens when you become divorced and are unable to sell the common house? Interestingly, people nowadays are forced to decide how much they hate each other, because continuing to live together is their best financial option right now, until the market gets back on its feet.
So if you can’t stand your partner, keep your house on the market while you go live with your parents or rent an apartment till the economic storm clears up. By the way, a divorce can easily top $30,000 in lawyers’ fees, so don’t act too rashly (or emotionally, if you can help it). Think about it real hard as there are much cheaper ways to move on.
Positive Tip #4 : Go where the demand is.
There are some good things that are happening as a consequence of this economic recession. For instance, some businesses are doing well right now: look at the entertainment industry — certain blockbuster movies are still raking in hundreds of millions of dollars. People in trouble want a distraction to take their minds off their financial woes; in fact, during the Great Depression the movie industry flourished, and it seems no different this time. So movie rental companies like Netflix are doing well.
Pawnshops are doing well: they’re seeing all kinds of fancy jewelry being hocked, even by people who are well off. Auto mechanics are having a boom as most of us would rather keep the old clunker another year or two rather than take on new debt. Collection agencies are experiencing good business for obvious reasons — so many unpaid debts require intervention! Would you consider going where the demand for labor exists? For instance, you can find a career in these top cities!
The point here is that, despite this grave slowdown in our economy, it’s possible to still find investment opportunities and business prospects that can become viable. There are ways to navigate the rough spots in order to emerge from this period, stronger and much sturdier. So let’s all just hang in there!