Thursday, March 5, 2009

If an economic crisis hits you, are you ready?

A few years ago our business and my dh's health were both struggling. We weren't making enough income to cover our business and our home expenses. We were very grateful for our emergency savings and it carried us until we were able to turn our business and dh's health around.

When the economy started to crumble recently and it became a hot topic of conversation on TV, radio, Internet, and among clients and family members, we decided that we weren't going to let the negativity affect our mindset. While we are not naive to think that the economy won't affect us, we just weren't going to dwell on it. Our business had a very good year in 2008 and we had every intention of continuing that trend.

For a variety of reasons, including the current economic situation, our business slowed down in February and we just barely covered our business and personal expenses. It is a scary reality when the brakes are put on full force and you are heading into a brick wall, but we have been here before and we will get through it again. Being self-employed can be scary in these situations because there is not a guarantee of a paycheck, so we have devised a plan to help us get through this hopefully minor hiccup.

We try to have regular monthly meetings to discuss our Family Balance Sheet. At a recent meeting we worked on some strategies to get us through our own economic crisis:

1. Silence is deadly
What tripped us up years ago was our lack of communication at our business. That sounds really silly, but we both had our roles at the office and we weren't discussing them with one another. It wasn't that we weren't talking at all; we just weren't connecting the dots.

At the time our business was going fairly well and we thought things would continue on their own, but surprise surprise it doesn't work out that way. We learned a scary yet valuable lesson and now try to meet monthly to discuss our business and our family finances. We also meet weekly to discuss schedules and any immediate concerns. These meetings aren't formal, sometimes it is in front of the TV after the kids are in bed. Sometimes we take the kids to their grandparents house and we go for dinner date/meeting.

Even if you aren't business owners, plan your meeting today with your partner and be proactive about what ever financial situation you are in.

2. TGFEF - Thank goodness for emergency funds
During our first crisis, we nearly depleted our emergency fund and we were really grateful to have it to rely on. We are still in the process of building it back up and the prospect of depleting it again is scary. We didn't need it in February and if we make some changes now hopefully we won't have to dip into it in the near future. There is a reason that funding an emergency savings account is usually the first thing on a to-do list from any personal financial planner, blogger, author. We learned this first hand and having an emergency savings saved our credit score, our sanity and probably our relationship.

3. Slice-N-Dice the budget
We have two budgets that we review: business and family. Categories in our family budget, such as dining out and clothing, fall into non-essential and will have to be cut out until further notice. After reviewing our expenses in February, I noticed that I overspent on groceries. I need to be more diligent at the store and stick to my list. I have been faithful about planning our menus for the week, but I know I have been throwing non-essential and impulsive items into the cart.

4. Think outside the box
We have been brainstorming ideas for additional sources of income with our business. We have plans to target new and different customers, add products and services that we haven't explored before and develop new products to market to our professional peers.

On the home front I have been very busy cleaning out closets, drawers and cupboards to prepare for our spring yard sale. In the meantime there are a few items that I might try to sell on Craigs List or Ebay. I have never done this you have any advice for me??

5. Faith in one another
We have gotten through rough patches before and we will do so again. The difference this time is that we are trying to be proactive before our finances get out of hand. The last time we didn't realize we had a problem until we were right in the middle of our financial crisis. We are partners in business and life.

Are you prepared if an economic crisis hits you? Do you have any advice to offer others in crisis?

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