Financial Crisis Survival Guide

These last few weeks the news has been bleak on the Yahoo Finance page that I frequent to check on the markets and monitor our mutual funds. As of this moment, the Dow is down 745 points on the day; a 7.22% drop. That is a lot of people losing a lot of money. I listen to Dave Ramsey on the radio fairly regularly and he has been getting numerous calls from people panicking about losses in the stock market. There are a lot of people worried right now.

I am not one of those people who is worried. Why? My wife and I have developed habits of sound financial decision making. Here are some things that we have done that have contributed to our lack of worry during these tumultuous financial times.

1. Pay off debt- A year ago my wife and I had two car payments totaling around $600/month. Late last fall we decided to get serious about paying off our car debt and dropped the dough to pay off one our vehicles outright. Immediately we had $300/month back in our pocket. Also, paying off the truck gave me the freedom to sell the gas guzzler in the spring and pay cash for my used gas sipping Honda Fit. We could not have done that if the vehicle had not been paid for. This summer, while I was doing military training and we were blessed to be making extra money, we paid off our other vehicle. We now have freed up $600/month of income; that is $7200/year back into our pockets. In the last 12 months, my wife and I gave ourselves a $7200/year raise. That makes a difference.

Get your debt paid off, don’t carry over credit card debt from month to month, and free up your income to work for you instead of being a slave to debt.

2. Save! Save! Save!- The other reason I am not worried about what is going on is that we have a comfortable amount of money in a savings account that is immune from the market turmoil. Even if we lost all the money in our mutual funds, we would still be fine. I know that some people think they don’t have the income to save, but I don’t believe that is true in a lot of cases. I think that for most people it is a lack of discipline. My wife and I have been living on just her paycheck for awhile now (I’m a full time student) and have still been able to save. One of the keys to being able to save is to avoid spending monetary gifts that come you way. If you have a family member who gives you $1000 when you get married; take a little bit out for yourself and dump the rest into your savings account. When you start adding up those gifts and other little sources of unexpected income, you will be surprised how much you can save. Again, the key here is discipline. YOU HAVE TO SPEND LESS THAN YOU MAKE!

3. Don’t jump ship- Right now is the worst time to jump out of the stock market. If anything, now is the time to buy since stocks are on sale. A disciplined, regular investing strategy will help you ride out the rough times in the markets and history tells us that those who stay in WILL COME OUT AHEAD. The odds are history will repeat, stocks will recover, and those who stayed in and those who bought will come out way ahead of those who try and time the market. However, make sure you don’t have all your assets tied up in the stock market. If you do, you have a legitimate reason to be afraid. If you follow the advice in steps 1 and 2 of this post, you shouldn’t have anything to worry about.

So, that’s why I’m not too worried. I actually transferred some money into our IRA today because today is a great day to buy and we have enough cash in savings that we can put a little extra into the markets when they drop. Don’t let the media freak you out. If you pay off your debts, save as much as you can, and invest wisely you will still be able to sleep at night and most likely when the dust settles, you will come out ahead of all of those who panicked and pulled out all of their money.

Please note that these are opinions based on my experiences and everyone should talk to a trained financial advisor before starting any investing strategy.


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