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The economic global crisis has done a number on the world. People lost their jobs and even their homes.
The 2007 financial crisis in the United States has expanded rapidly in Europe, bringing recession and decline in all industries. Five years after its debut, European states still struggled to come through.
People are talking about a new crisis that is waiting to affect us all due to the coronavirus. We don’t know whether projections are accurate, but here are ten lessons we have learned from the financial crisis, lessons that we should all apply in the way we manage businesses and money.
1. Never acquire too much debt
You should not ever be indebted to the limit. If banks accept indebtedness to 70 %, that does not mean you have to take the 70%. Think that anything can happen, and the more money you borrow, the harder you will be able to pay back.
2. Pay the right price
It is not right to pay for things at a price that you don’t feel they are worth. Wait until the price reflects reality.
If you bought a studio before the crisis with the money you can now use to buy a two or three-bedroom apartment, how comfortable would you feel in the new house?
If you’ve got a fancy car that you can no longer pay but now costs 30 % less, what is that like? Never hurry when you make a purchase.
3. You have to work
The loser mentality like ‘time passes, wages go’ makes you expendable for your employer. In tough times, you’ll be the first fired or, at best, last on bonuses.
4. Do not invest in things you do not know (enough)
It’s a simple tip that would have been very useful on Wall Street at a certain time.
Extended: you have to ask for more information when you do not understand something. Unit- linked products, overdraft, subprime – what do they mean? Information is power.
5. Focus on savings
So that you will not lose your house or car in a month if you lose your job. Work on a budget so that you can put money aside with each paycheck.
Having an emergency fund is the best thing you can do for yourself and your family, not only when a financial crisis hits. But all the time. If things are good from a financial point of view, that means you can save some money.
6. Nothing is indispensable
You can live very well without many of the things you thought last year to be indispensable. If we got used to living all the time as if we were always facing a financial crisis, we would save more and waste less!
The luxury of quiet sleep is more important than a luxury car lease. Of course, that doesn’t mean you cannot splurge once in a while, but don’t make a habit out of it. Moderation is the key.
7. Future is unpredictable
Nobody knows what will happen next. Many do not even know what is happening in the present, let alone what will happen in the future.
To get through these times, turn to a simple strategy: save, diversify, do not risk when it’s inappropriate, always prepare yourself for a negative scenario and the means necessary to survive.
8. Run your business the right way
If you have a personal business, you have to build it solid and intelligently, do not rely on speculation, self-increasing market, lack of competition, countless employee expenses.
Here are at least 14 businesses that succeed in a recession. Are you running one of these businesses? Then you’re lucky as all you have to do is running as smoothly as possible. If not, then it may be the time for a reconversion.
9. Read carefully
When it comes to signing an agreement, no matter its nature (loan, lease, insurance, etc.), make sure you give the contract a good read. You have to read small print terms and abstain from signing them when you are not convinced that you understand because you may face the most unpleasant consequences. Do not be afraid to ask if you do not understand something.
10. Diversify
We need to diversify your investments and never put all your capital in stock, real estate, or IT. You never know when and where the recession will hit. Invest wisely and in small amounts.
