How to ride the recessionary tide?

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Recession is on every persons mind these days. Since 2008 the job market hasn’t been doing good globally, except in some sectors or in some countries. The earning potential of an average earner has gone down due to cost cuts by large & small organizations. The annual inflation of 6-8% is eating away the value of dollar, pound, sterling, Yuan, Rupee every year. Human population on the earth is growing almost at same rate as before and in some countries even faster. That means demand for resources is on the rise. Depletion of natural resources (pure air, land, water, plants, minerals) is causing rise in prices of consumable items. Unplanned expense adding burden to the monthly budget. Tax burden cutting the net salary available to spend. The recessionary tide doesn’t seem to be easing out since past 5 years and how long would it continue is left for anyone to guess.

Though the problems of recessionary economic conditions look distressful, there are ways to ride on this recessionary tide. Surfers usually ride on the surfing board in sea till the point they cannot surf ahead. Then what do they do? They wait for the big tide to come along to ride underneath it using its force to navigate. This practice is now extended to ride the financial tide. Let us look at it in detail.

 Many people expect miracles to happen with economy. miracles happen, however they are rare. If there is one in 10 million chance of winning a lottery why waste time.

Solution to riding the economic tide of recession is distributed in easy steps.

Step1. Calculate your net worth. While most people aren’t aware of how to calculate their net worth let me give you a simple way to calculate it. Have pen and paper handy. Write down all the assets (current property value, cash, bank balance, current value of your investments in mutual funds, stocks, bonds, current value of gold, silver etc). Sum it up. The write down what you owe. How much is the balance loan amount – personal, home or commodity loan or any other outstanding. Subtract the assets total from the debt total, that will give you your net worth. If your net worth is close to zero you aren’t saving enough or you have taken loans that are beyond your capacity to digest.

Step2. Once you know your net worth, look at what returns you are making from your investments. If you have a home in addition to where you are living, check if it is giving you a return of 5-6% minimum of the property value as rent. If not, then re-rent it or sell it. People hold on to their property waiting for the ideal price and that rarely happens. If your property is worth say 100,000$ which these days might be the lowest price in most of the towns. When you sell it and earn a handsome cash, this cash now can be deployed to income generating sources. Divide investments in to 3 buckets. viz. aspirations bucket, Growth bucket and safety bucket. Invest 1/3rd of the amount in high returns and high risk avenues like buying blue chip companies bonds (*they should be high trade volumes). China has booming housing demand. You may consider buying a commercial property in Shanghai. It will give a decent cash flow. Yet another good investment is buying foreclosure property and selling it at a premium price. You do not have to invest in to entire price of the property. Consider funding a business (*Do it with the help of someone who has already done it successfully). The second bucket is an investment in Gold, or land or food. You may consider setting up small kiosks (coffee/coke vending machines). This  investment will also generate cash flow. The third bucket is safety bucket. Put 1/3rd of your money in government bonds, fixed deposits. If you aren’t in job you could incorporate yourself and get tax advantages on the income you draw from your business.

Step3. Look at alternative means of income generation. Work part-time. Working 2 hours part-time every day will give you an extra income of 5 days in a month. If you are earning say 3000$ a month, working 2 hours extra gives you an additional cash of 600$ a month. Not bad isn’t it. This is the minimum you could earn. Extra 600$ means it will take care of your monthly food expense, travel if you are taking bus or train plus it will leave you some spare cash.

Step4. Work on your skills. Most people do not know when they polished their axe. Their skills are outdated and they are less productive. Spend some time polishing or brushing up the skills you get paid for. Along with it acquire new skills. If you optimize on 1 hour each day and spend 1/2 hour learning new skills you will easily acquire a new skill in 3 months. You increase the probability of landing a better job, better pay or creating your own job.

Step5. Work on your body. If you are overweight, you are carrying extra weight, extra lethargic attitude, extra discomfort with you. It will always limit your potential to grow. Spend at least 1/2 hour exercising. You could join a gym, yoga class or simply run in the morning. This will give you that extra energy you need to go extra mile in your career.

Step6. Keep a tab on expenses. Divide them in to Absolute Must, Desirable and Luxury. Spending on grocery is a must, spending on medical expenses is a must. An absolute must is an expense bucket which is without money will make your living impossible or uncomfortable.

The desirable expense is paying for cable TV, dining out expense. The last bucket is expense on a cruise, on dining in 5 star hotel, on buying Armani coats, on buying Tag Heuer watch.

 Use the golden rule. Create an asset to pay for liabilities.

Step7. Form a habit. To acquire new skills, to do the workout, to invest regularly a habit is required. It requires a character to resist temptations to buy expensive items. Set goals and accomplish them through executing daily tasks. This will create momentum and take you closer to the realization of goals. Read books.

These 7 steps are the steps for riding the recessionary tide. Good Luck!

How to thrive during recession?

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“It is a rough road that points you to greatness”.  -Seneca

Top of every person’s mind is how to ride the recession? Backed with Fear and anxiety this is the biggest destroyer of peace of mind. More than the fear of recession it is the consequence of losing a job, unable to meet expenses, feeling unworthy, loss of lifestyle, how to pay loan installments are the real fears in mind. A person fights them every day in his mind, since it is a virtual battle and situation doesn’t change in reality this battle is always won by the other party.

Recession is an impact of falling dollar value leading to high commodity prices, reduction of purchasing power of people, leading to reduction in demand. The bigger impact of recession is borrowers unable to pay back lenders, companies producing less due to rising costs and decreasing demand. Since the cost inputs have gone up and the revenue has gone down companies downsize their staff. Other than directly revenue generating areas, staffs in these areas are cut first. People now also have to work long hours & take more work. If there is at  

 What is the solution? How could one live a peaceful life without this fear haunting him?

Let us draw the solution in some easy to follow steps in our daily practice:

Step1.

Understand this is an external event, something beyond your control. Externalizing it takes off the pressure. Once the resistance to the event goes away the rational thinking kicks in.  

Step2.

Now flip the event to see it as opportunity. People get outrageous when they hear this. How could recession be positive? It is taking away our jobs, making us unhappy. It is still an opportunity. How? During recession people go back to what they used to do 100 years ago. They used avoid unwanted expenses. They saved some money. They worked out better ways to manage their monthly expense budget. It wasn’t being miser. People adopt new habits. They may prefer to walk a few distances instead of taking a cab or use their car as less as possible. What it results is in to good walking exercise, knowing people as you may interact on the way. As you talk to more people you may hear of a new job opening somewhere or an overseas job that is in the offering.

Other positive effect of recession is for those who wish to start a business on their own. Since the startup cost is low and so is operational cost many budding entrepreneurs launch startups during recession. Microsoft, Apple, KFC were all launched during recession period. They had big idea and low budget.

For people in jobs, they could learn new skills. Usually when the economy is doing well there is a demand for your existing skills, but then one gets complacent with it and stops learning new skills. Only 1 in 10 people actually acquire skills successfully and use them. Many new courses open up during recession period as training institutes know that people would be looking for learning new skills to earn their bread and butter. Due to competition many of them offer courses at cheaper rates which would otherwise cost several thousand dollars.

 Step3.

 Once you manage your budget (outflow), learn new skills, network with people you create greater possibility of creating a better future managing the present. Now you need to be patient and wait for the right opportunity to knock door.

We see opportunities mostly within 100 miles of our house. This thinking has to change. There are many opportunities outside. There are people looking for the skills you have and they can’t find the right candidate. It’s just that they have never met you and vice versa. Advertise your skills like crazy. Talk to people. The best marketing tool in the world – Talking to people.

 Time Management.

 We learn the importance of better time management during recession. Better time management can be accomplished by right prioritization of tasks. If you aren’t clear about how you are going to spend your day, you might be wasting a lot of time. Unplanned day creates more work.

To set right priorities make a to-do list and match it up with your goals. Stick to doing activities related to to-do list. You may also make a not-to-do list to avoid wasting time. Typically my not-to-do list is not checking mails in the morning. Checking mails doesn’t produce anything other than informing. Hence I do it in the latter half of the day.

Step4.

Give as many interviews as possible, however do not apply for any job that comes your way. If one applies for any job, he wouldn’t enjoy it even if gets it and eventually he will be kicked out. You may not get through a few interviews, but that’s ok. Every interview you get better and increase probability of clearing it. Once you come home from interview write down what went well, what did not go well, how can it be improved, what steps you would need to take to master it.

In parallel, start publishing your articles on the web on the social networking sites. Let people know about your creativity. You may get some good referral.

Spend time reading. Now, reading to some people is a pain, yet the payoff is good if you spend at least ½ hour each day reading about your field of interest, you have to prioritize what you are going to read about. For e.g. If I am looking for a Managers position in IT I would read about what other managers are doing in their fields, what are the new initiatives at companies like Apple, Google. These companies invest in innovation and they have programmes for people who are interested in working on those projects. They usually do not advertise in media.

Reading biographies of successful people is a very powerful tool. Success leaves clues. You would get solution to one of your mind-blocks.

Step5.

Receive! Once you make all the efforts in the above 4 steps and show patience, opportunities show up. You’re learning elevates and you become a different or a better person. Do not accept offer from the first company who gives you offer unless you are desperate. Check how the company is, what the growth opportunities are, what is its culture, does it match your thinking. Employment opportunity is a mutually beneficial opportunity. The company that hires people is investing in them and hence when they get good people they prosper. So, never ever think that the company is doing a favor to you by offering a job.

If you aren’t sure whether the company would be good match for your career then volunteer to work as apprentice for 1-2 months. After this period you may choose to continue with full time employment or look elsewhere.

Note for those who wish to start up their own company:

During recession you may also have limited budget. Hence it is important to focus more on sustainable Cash flow generation rather than one time payoff.

Keep costs low, yet those that have high payoff, one needs to invest in. For e.g. investing in marketing tools, is needed.

Keep the business as lean as possible. Along with keeping it lean it also has to be scalable. If you receive an order 10 times higher of your regular production capacity you should be in a position to produce more in given time. Scalability comes from knowing how to secure resources on short notice.