5 Things you need to do right now.
- Get organized
- Examine your expenses/liability payments and adjust
- Consider sources of capital that you have access to already
- Revisit your initial investment account decisions and purposes
- Last resort: look at adjusting insurance coverages
Overall, if you’re personal and business finances aren’t organized in a way that you can see everything from a “birds’ eye view” then it will be difficult to make strategic decisions. So, if you aren’t organized then the first step during a crisis is to get a handle of what’s going on within your personal balance sheet, income, and expenses – not just within the business.
Reexamine your savings contributions, expenses and liability payments – then adjust
A crisis will force you to be more aware of what purchases are necessary since revenues or income might be tight or potentially get tighter (this goes for both business and personal). Consider reducing contributions to illiquid accounts like 401(k)s, or other types of retirement accounts that you don’t have quick access to. Call your landlord and venders and see if they are willing to work with you on your payments. Call all your lenders and see if they are willing to allow you to adjustments or stop payments altogether temporarily. To free up cash flow, you can also look at refinancing your mortgage OR getting/using a HELOC that you have if you need cash – instead of using credit cards.
Consider sources of capital that you have access to already
Focus on the assets that are most liquid first. Examine which investments you need to sell if you need the cash. This is something most people aren’t able to do well – because either the tax consequences could’ve been avoided, or they end up selling certain investments at the wrong times. You may be able to take a loan on your 401(k) in order to gain access to cash without having to pay the taxes and the penalty that you would have to by withdrawing it. If you have to spend on credit cards because there is no other option, then look into refinancing the debt once the institutions are willing to lend to you again.
Revisit your initial investment account decisions and purposes
Consider not selling your investments just because your investments are down. If the investment markets are down and your investments are down, don’t get upset – get curious. Sometimes adjustments are necessary, but a lot of the time if you go back to the reason you invested that money the way you did – then the only adjustments you should consider are if the original purpose of that investment account has changed. We all have different degrees on how successful we are with staying calm during a crisis. But the last thing you want to be doing is making investment decisions based on emotion. Most people who sell their investments at a time when they’re down will regret it later – because the market does come back up. Of course, the exception here is if you need the cash to pay for obligations that you just can’t miss.
Last resort: look at adjust insurance coverages
Don’t let insurances lapse that you can’t get back – e.g. certain types of life insurance, disability insurance or long term care insurance. Also, don’t reduce coverages to save money unless it’s a “good enough” amount that you’re saving. Sometimes saving a few dollars just isn’t worth being exposed financially. Cut expenses elsewhere if you’re going to reduce spending. You can also try and ask insurance companies for a grace period. Some of them may be willing to defer your payment to a later date. Don’t forget that if you have insurance policies with cash values that you can take a loan on them.
This information is brought to you by our Professional Resource, Burnett/Seeko Financial. For more information or to contact directly, please click HERE