Tips to survive these economic times

We’ve witnessed dramatic financial swings over the last few years – from boom times to economic lassitude.

Most frustrating of all, there’s no foolproof way to predict the economy’s next move. The only thing that is certain is change.

A good way to survive these changeable times is to practice smart money management, and to position yourself to help provide maximum financial security, regardless of where the economy goes. Here are some suggestions:

• Reduce your expenses. Good advice at any time, it’s doubly valuable now. Start by examining your budget. Look for ways to cut back on unnecessary expenses. If luxury items became commonplace for you during the easy-money days of the 1990s, redefine what is necessary. Revise your attitude toward spending. Be a bit cautious regarding big expenses, at least until the economy decides where it is going. This will help you weather tough times, as well as position you to capitalize on opportunities as they arise down the road.

• Keep whittling away at debt, reducing your balance a little each month. There’s a great deal of truth in the saying: It’s better to earn interest than pay it. Set debt-reduction goals and, if necessary, make some short-term sacrifices. In the end, you’ll find that your standard of living will increase just by paying down your debt load. Most of all, don’t add new debt. More and more people are proving that it is possible to live a credit-free existence. They live by a simple philosophy: If I can’t afford to pay cash, I can’t afford to buy it.

• Secure your job by making yourself indispensable. Though every week brings news of the latest round of layoffs, unemployment is still relatively low. Nonetheless, it seems that the name-your-price days for job seekers have come to an end. Businesses are taking a wait-and-see approach to hiring in changeable times. The best approach: Look for ways to emphasize your unique skills and your value to your employer. Also, if you’re thinking about a career change, keep in mind that this may not be the best time to make the move, if only because it puts you at the bottom of the seniority list… making you the first to go if another round of layoffs starts.

• Don’t ignore your bills if you get caught in a financial bind. You’ll only accumulate interest fees, jeopardize your credit rating and compound your problems. If necessary, contact the people you owe and explain your situation. Most will accept a revised payment plan, with no penalty or additional interest.

• Preserve your future assets. Try to avoid making withdrawals from IRAs and other qualified plans unless absolutely necessary. If you do start cashing in your plan money, you may be penalized for early withdrawals at the expense of your own future financial security. Worst of all, you’ll consume retirement dollars you have been accumulating for years and may have a hard time replacing.

• Keep your insurance in-force, including your medical, life and disability insurance coverage. It’s tempting to let your coverage lapse when forced to choose between paying insurance premiums and paying the mortgage. But financial protection is particularly important during difficult economic times.

Overall, the best way to weather an uncertain economy is to protect what you have and reduce your expenses. Most of all, keep in mind that downturns are normal, temporary phases of the economic cycle followed historically by ever-increasing prosperity. Just remember that if you maintain financial self-discipline when times are tough, you’ll probably be way ahead of the game when the financial climate turns around.