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Are You Protected Against An Economic Slowdown?
January 24, 2007
Last week I was at an investment conference in San Francisco, and much of the conversation centered on the economy in the year to come.Some experts said recession, others said slowdown.Such cheery discussion!
Since we don’t have a crystal ball to know which of those not-so-rosy situations might occur, it is important for you business owners in construction related fields out there to take steps to avoid getting caught in a financial crunch.
“The recent trend of slower growth is not expected to be reversed any time soon,” says Chris Isidore of CNNMoney.com in Recession Clouds Darken 2007 Outlook.
He goes on to say, “Home building and the broader real estate market are both already in a recession by most accounts and are expected to stay there well into next year.”
If people are moving less, spending less for houses, or postponing furniture or remodeling purchases because of economic fears, how would it affect you personally?Would your own income drop?Would your business valuation take a hit, lowering your overall net worth or borrowing ability?Would you need to reevaluate aspects of your own lifestyle?
Protect Yourself Personally
You and your family may feel stretched or concerned about your finances in the future, but no one loves confronting what to do, especially when there are interesting things to distract ourselves, like checking the new season of American Idol or ice fishing.
However,if higher gas prices, credit debt, rising college tuition costs, and the possiblity of less income make you nervous, you can take some of the following steps to protect yourself against an economic downturn:
- Pay off your consumer debt now rather than waiting, eliminating high finance charges on credit cards that add to your monthly expenses;
- Look at your expenses and divide them into “fixed” and “variable” expenses just as you would in your business;
- Curb or eliminate unnecessary variable expenses now, not when things get tight – that means the cappacinos, impulse buying at the hardware or grocery store, eating out too often, etc.;
- Look at the investment mix in your 401k or any other qualified or taxable accounts to make sure you’re diversified to protect against broad market declines;
- Examine your own mortgage.If you have an ARM (an adjustable rate mortgage), are your monthly payments going to go up if interest rates rise?Is there a cap?Would you be better off locking in a fixed rate, even if they are higher than in the past?
- Make sure you have a cash reserve to cover at least 3 months of expenses;if you have some liquidity, chances are you’ll feel more secure;
The economy could go either way, but you can act now to protect yourself against a possible downturn.If the economy is healthy, you’ll still be in better shape.Then you can relax and watch reality TV in peace.
Suzanna de Baca is the President of Private Capital Solutions Group.She is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 7 Hanover Square, New York, NY 10004, (888) 600-4667.Securities products/services and advisory services are offered through PAS, a registered broker/dealer and investment advisor. Private Capital Solutions Group is not an affiliate or subsidiary of PAS.
PAS is a member NASD, SIPC.
Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.
Posted by Suzanna de Baca on January 24, 2007 | Comments (4)
