This economic meltdown has many people second-guessing the financial decisions made in the last 8 years.Where do you stand, and what can you do about it?
A couple of years ago we shot the Snake River rapids in the Grand Tetons. Like many rapids, the river offered its “flat” moments (stage 1), and churning moments (stage 4). One time we prepared ourselves for a level 4, and were hit by something unexpected, hail. In the middle of summer we turned a corner and were pelted by hail stones in the face during a storm.
I think many of us can relate to this in the current economic times. But, the extent of damage depended on whether you operate your business (and personal finances) in a stage 1 or stage 4 rapids
I found there are two main types of business and investment personalities: One type are those who lived during the depression, or learned by it. They are very conservative in what they do, and try not to be too speculative in whatever they do. The other type is the sprinter. Many of these sprinters profited handsomely in the past 8 years riding the leverage train of real estate.In their business and personal finances, they also seem to leverage heavily.
When I work with clients personal finance strategies, I keep these two polar positions in mind. If a client is younger, then they can obviously take more risks with their personal finances. However, when a client approaches middle age, I caution them that the downside is more severe if they do not meet their personal finance objectives. So, both in personal and business opportunities I recommend the following:
- Always have a well thought-out strategy. What do you want to accomplish with your personal finances?
- Don’t fool yourself with the possible outcomes. Look at worst case scenarios. Personal finances can be very emotional, and if you don’t drop the emotion in your thinking, it can hurt your final strategy.
- Plan for both your intended outcome and your worst case scenarios. Just the other day, my 14 year old lost his English notebook with homework and school work. He thought he left it in the classroom, but wasn’t sure. I told him to not just think about what he would do if he found it, but what he would do if he didn’t. This took some of the stress off him since he had rationally thought about how he could replace the work while he was calmer. If he would think about this at the time he found out that the notebook was not in the classroom, then he would have beem more immotional and could have created a flawed strategy. Luckily, his notebook was there teh next day, and he received credit for all the work.
- You may want to reduce your risk, just in case the worst case scenario occurs. Remember, water can both save you, and kill you depending on how much your drink. Don’t throw yourself completely into a personal financial position, whether it be real estate, stocks, or percious metals without thinking about the consequences of over investing in one product. Your personal finances can live or die depending on the magnitude of your decision.
- Execute the plan and view it objectively. Too many business persons in this position extend their risk because they are looking for the “next big deal.” I find this rose-colored glasses approach a major cause of business failures.
- If you are hurt by the resent economic melt-down, adjust your strategy towards a stage 1, but don’t circle the wagons. Keep a sharp lookout for business opportunities that may pay handsomely when the economy recovers. You may want to invest in social networking or search-engine optomization services in order to get your business a higher profile at a smaller price tag.
Always get professional help.