Steps to Take in a Tough Economic Climate

“Stop whining,” says former Senator Phil Gramm. “This recession is all in your head.” Well, with all due respect to former Senator Gramm, I think that it is a little more than just in my head. It is coming out of my wallet every time I turn around. I think that this recession we are facing (and yes, I do believe we are in a recession) is starting to get to people. We are paying more at the pump, at the grocery store, and in utilities. However, he is right. It is time to stop whining and do something about it.

I believe that there is a series of steps that you should take right now to make sure that your financial house is in order. Who knows what the future will bring. However, I like to live by one verse when it comes to money and future risk.

"A prudent person foresees the danger ahead and takes precautions; the simpleton goes blindly on and suffers the consequences” (Proverbs 22:3 and 27:12).

Most people fall into the simpleton camp. We have no way of predicting where the economy is headed. However, we do have control over our actions. If we take the right actions right now, you can provide for whatever is coming down the pike.

1) First things first – Give this process over to God. I believe that the most important priority in our life is the one that we typically forget. You cannot be prepared with getting your financial house in order without God being in charge.
2) Start tracking your expenses – It is so important to know where you are spending money. How are you going to know where to cut back if you don’t know what you are spending?
3) Be proactive – Look ahead and anticipate future expenses. Sit down and anticipate one time expenses that will occur in future months and figure out how you are going to pay for them.
4) Check your insurance coverage – This is something that you should do regardless of the economic climate. There is no excuse for not being prepared for the curveball life might through you or your family. Understand how your health insurance works. Especially know that you have enough life insurance. Life insurance is inexpensive and is one of the most important coverages you can buy for your family.
5) Know the risk level that you are taking with your investments – Talk to your financial advisor or your 401(k) representative. Prior to talking with them, pray that you will have a sense of peace. If you don’t get that sense of peace, get a second opinion. The bottom line is that most advisors are not equipped to handle these types of environments. Thus they will just tell you to hold on for the long-term and not worry about it. Just remember that big losses are tough to come back from. It never makes sense to put yourself in harm’s way when it comes to investing.
Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.