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Four Rules to Help You Survive the Upcoming U.S. Financial Crisis

For the past two years, many economists have predicted that the United States will soon be taking a financial hit. Some predicted it would take place in 2018. It didn’t. Others stated it would probably take place in 2019; it hasn’t happened yet. The US government has for the past five years purported that the US economy is growing. Well to be honest, that level of prognostication depends on how you view things. What I see is a growing market before the US-China trade war. In addition to this we have also seen retailers closing many or all of their brick and mortar locations, job losses and increased automation.

No matter how you see it, I would like to leave four “rules” that you should consider as we prepare for the pending financial hit:

1. Don’t compromise your financial dreams
Never compromise your financial dreams. I would encourage you to still push towards them, even if you have to curtail the way you go after them (you may not be able to be as aggressive as you have been), but by all means keep pushing despite the financial condition.

2. Acquire assets that have value
In any financial environment, the key term is cash flow. Cash flow is the amount left over from what you obtain on a regular basis from an asset and how much it costs regularly to maintain that asset. For instance, if you own a property that you rent and the monthly income is $1,500.00 but the cost to maintain (mortgage, taxes, management, maintenance, etc) cost $1,000.00 per month, then the cash flow is $500.00 per month. Remember, cash flow is king, especially during a financial downturn.  You also have the ability to sell this asset if the need or proper situation should arise.

3. If you have not yet done so, establish an emergency fund

Make this a priority. Establish an emergency fund, and more importantly, establish a concrete definition of what an “emergency” is.  Everyone’s definition of that word is different so the use of an emergency fund will be different.  I would start with a goal of $1,000.00 in an emergency fund.  Yes, I know you have a credit card, but when an emergency arises it is best to pay for that emergency one time.  When you use a credit card to cover an emergency, you may have to pay for the same emergency multiple times, depending on the interest rate and the amount of time that it takes you to pay off the debt. Get that emergency fund and definition established ASAP!

4. Divide financial activities into three buckets (needs, wants and likes)

This is where most people get into trouble—they only have two buckets—needs and wants.  Inside the needs bucket you may find that there are some wants and likes in there.  Also in the wants bucket, there are probably some likes in there.  We have to be honest with ourselves or bring a third-party in to help segregate these categories. It may sound harsh put it will definitely help in the long run.

A need is classified as something that you can’t under any circumstances live without. In that bucket I would place shelter, clothing, utilities and food.  A like would be something that you don’t absolutely need to survive, but it would make life a little easier to manage.  In the like bucket I would place a cell phone, subscriptions (including gym memberships) and cable television.  A want is anything that you don’t absolutely need to survive and won’t make life a little easier to manage.

Wants and likes are usually muddled together and cause many financial issues within a family. If you stick by these four “rules” and good old fashion wisdom, you will survive a financial hit.

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About Frederick Towles

Frederick Towles is an entrepreneur, author and professional coach on personal finance, recognizing, seizing and leveraging opportunities of all kinds. Frederick founded The Towles Group Inc. to address issues that relate to small businesses and individuals – accounting, taxation, asset protection, financial compliance, wealth creation, debt management and business management. He also founded Unlimited Expectations Inc. which provides tools for individuals to assist them in the areas of opportunity recognition, leadership and personal finance. Through the tools and services offered by these companies people are positioned to operate their lives and their businesses at optimal capacity.

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