When there is a financial crisis, businesses and purchasers are unable to pay their debts, valuation of asset pricing see a sharp decline and banking institutions come across severe cash flow problems. This generally happens when there is a general feeling of panic during which customers of banks fear that if they remain in that financial institution the value of their asses will drop resulting in selling off assets.
Some other situations that can be associated with a financial storm are a stock market crash, a currency crisis or a pop in a speculative financial bubble. This crisis may be associated with a region or may spread across many economies across the world.
Multiple factors cause a financial crisis. One of those can be when institutions and assets are overpriced because of optimism which can then further be more explosive and irrational when an over-enthusiastic accumulation is seen on those assets by investors. An example would be a rumoured failure of a bank which results in rapid sell-offs of assets from the savings accounts of that bank.
Such actions can accelerate the financial crisis. The best example of this is most easily explained by the infamous 2007-2008 Global Financial Crisis which was by far the worst economic disaster since a long time. It started with a small mortgage lending crisis in 2007 and then spread to global investment banks with their failures in 2008. Thus, it’s a fact that most people have money invested in the stock market in various forms.
Staying on a secure financial state during times of market stability is one of the best methods to keep safe during any financial storm. Thus, it makes sense to stay away from predictions of the unknown golden future and be focused.
Finally, these points can be considered a check-list of sorts to ensure you are protected.
1) Set priorities and then have a plan for them. It’s always best to know your financial goals and with careful planning, they can be achieved. Being proactive simply by saving money for that house you wanted to build or for the future of your children will mean a provident financial future for you in the longer run.
2) Make a list of assets that you can make money from selling. It can be anything from jewellery, property funds holdings or equity or a work of art. These assets can easily be purchased back when the time is right. It’s not advisable to take a loan against property or any asset.
3) Always be willing to change some long term goals to short term goals. For example, say if there is a loss of income, and you have access to money which was meant for the long term, use that money to survive rather than borrowing or selling any asset below their intended price or excessive accumulation in a credit card account.
4) Saving and spending regularly will keep your cash flow in check. You can be better prepared for emergencies like losing your job or a major sickness prevailing.
5) At the time of a crisis innovations can be done to match the requirement of the time faced. Always be willing and vigilant by finding out what is in demand and how to learn that skill post which you can reap benefits or use existing skills to make a new source of income. It’s always advisable to have multiple income streams which can save you in times like these.
6) Not overspending is one of the simplest items on your checklist keeping you safe during a crisis. It’s advisable to draft a daily, weekly or monthly budget and try to stick to it. Some expenses like home maintenance or auto repairs may occur which can derail your budget but having an emergency fund can be a blessing and it should be kept separate for these kinds of emergencies.
7) Always question your purpose and contributions. Living in a family should encourage you to relate to the world and make a serious effort to solve problems efficiently and finally contributing. Even a small contributing can go a long way. This can also be done by saving resources as much as possible as even one person can make a difference. This can be done with little discipline and diligence.
8) Many people behave differently during a crisis and they revert to their original self once the crisis is over. Thus don’t expect the world to change after the crisis is over.
9) Finally, it is advisable to keep in mind that a longer-term investment allows room for growth. It’s been found that although investing in the stock market is not a sure thing but with time that investment can become profitable. It’s not necessary to buy individual stocks. Rather doing your research and investing in developing companies with somewhat stable ventures while their prices are low can result in a smart investment even during a crisis. So planning and investing effectively can make the most of your stock market investment.
10) There are other options apart from the stock market investment. Forex trading is one such option which is buying and selling currencies in a decentralized market. You can easily get forex trading training by opting for an online forex trading course. These courses provide lots of material, online classes and also introduce you to a seasoned trader who can guide and give you a practical approach to trading.
Thus, be safe during these times by being proactive and protecting your self with a smart and effective plan for your financial needs. It might just help you survive the storm.