uncertainty

How to Thrive in Uncertainty

Matt Bell — Thu, 08 Sep 2011 10:24:18 +0000

Even a casual glance at the headlines will tell you we’re living in especially uncertain times. But don’t lose hope. There are ways to thrive, even in times like these. (See also: Emergency Plan: Better Than an Emergency Fund)

Control What You Can Control

Psychologists say feeling in control is one of the essential wellsprings of mental health. We can’t control wars, the weather, or Wall Street, but there’s much that we can control, so that’s the place to focus.

Plan to Succeed With a Budget

How do you feel about the idea of using a budget? Excited? Happy?

I didn’t think so.

Non-budgeters use words like “restrictive,” “rigid,” and “constraining” to describe budgets. However, people who actually use one say a budget helps them feel “in charge” of their money and that it keeps them “in a position of knowledge and control.”

Especially when times are uncertain, it feels good to be on top of where your money is going each month.

As explained in my Budget Quick Start Guide, there are four steps to using a budget:

Estimate where your money is now going
Develop a plan for how your money could be used more effectively (see the Recommended Spending Guidelines for different size households and different incomes at the previous link)
Track your use of money
Analyze where your money actually went at the end of each month and make any necessary adjustments.

If you don’t currently use a budget, give it a try. You’ll soon find yourself feeling much more in control of your finances.

Create a Safety Net

Even in good times, life is filled with uncertainties. Unexpectedly expensive medical issues, home or vehicle repairs, and more can pop up at a moment’s notice. The people who are best prepared are those with an emergency fund, preferably stocked with six months’ worth of living expenses.

If that sounds like a lot, just start where you can. Open a separate savings account. Then set up an automatic transfer each month from your checking account to this savings account. Start with $25 a month if that’s all you can afford. The key is to start.

If you have any debt other than a reasonable mortgage, build an emergency fund totaling one month’s worth of essential living expenses and then get focused on getting out of debt. If you’re already out of debt, build your emergency fund up to six months’ worth of essential living expenses.

Ditch the Debt

If you’re carrying a balance on a credit card, commit today to stop going any further into debt. Take your credit cards out of your wallet or purse so they’re not with you when you go shopping. Cut them up, or put them in a block of ice if you have to. Do whatever it takes to make it make it as difficult as possible to take on any more debt.

Next, fix your payments. An important thing to know about credit card debt is that if you stop going any further into debt and you make the minimum payments required by your credit card company each month, then each month you’ll be required to pay less and less.

It isn’t kindness on the part of the credit card company; it’s math. Your minimum required payment is based on a percentage of your balance. So if your balance is going down a little each month, so will your required minimum payment.

Making this declining minimum payment will keep you in debt for approximately…forever! However, if you simply pay the same fixed amount each month, you’ll really speed up the process of getting out of debt.

Even better, see if you can pay more than the fixed minimum.

Stay Employable

There’s no such thing as guaranteed employment anymore, but keeping your skills on the leading edge will go a long way toward staying as employable as possible. If your employer offers tuition reimbursement, pick up a night class in your field. At very least, make sure you're reading the latest books and leading blogs in your field.

Give Some Money Away

In uncertain times, it’s natural to narrow our focus, thinking mostly about our own needs and even becoming fearful. Regularly contributing some money to a cause or organization we believe in can go a long way toward getting us out of those ruts. Giving money away takes our focus off ourselves, keeps us mindful of other people’s needs, and makes us feels good to be part of something bigger than ourselves.

What other steps are you taking to thrive during uncertain times?

This article is from Matt Bell of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

7 Tips for Small Business Success in Troubled Times

Tom Harnish — Sun, 28 Aug 2011 22:08:35 +0000

Link:

http://www.openforum.com/articles/7-tips-for-small-business-success-in-troubled-...

The spastic stock market, an economy in the doldrums, and a narcissistic Congress represent real challenges for small business owners. What happens on Wall Street and in Washington has a very real affect on business, and managing under all that uncertainty isn't easy. Here are a few tips from experience that can help.

1. Turn Off the News

If you watch TV news you probably expect the world to end any day. No, I’m not talking religious zealots preaching that the end is nigh, or nutters that have proof, PROOF, mind you, that the Mayan calendar predicts an apocalypse in 2012. I mean the day in, day out focus of the news on, well, bad news.

Now, I’m not suggesting that a bazillion dollar national debt isn’t legitimate bad news, nor am I suggesting that when brave SEALs are killed we shouldn’t mourn their loss. But is life improved when we learn the lurid details of the latest kidnapping, bank robbery, or murder? Is that news you can use?

You decide what you watch, and thanks to our mirror neurons, you feel what you see. Want to feel better about the world and your business? Turn off the news, and get back to work.

2. Cash is King

The so-called Great Recession of 2007-2008 proved, if nothing else, the maxim that “cash is king.”

Your business has to generate more cash than it uses if you’re going to survive. That’s obvious; that’s what profitability is all about. But what a lot of people don’t understand is that you can’t spend profits unless they’re cash profits. Paper profits aren’t worth the paper they’re printed on when it comes to survival and growth.

In fact, even a very successful company can go – or grow – broke if they don’t watch their cash position.

If your salespeople are successful at generating orders, even with prices that offer a good profit, stale receivables can bite you in the butt.
You borrow for raw materials so you can afford to hire more staff to keep up with demand. And people love what you’re selling, so you borrow to get more raw materials and staff, and before long you have a huge backlog of orders – and huge debt you can’t cover because cash is just trickling in.

The sooner you have your customer's money, the sooner you can use it. If you're selling to people who aren't paying you quickly enough, or heaven-forbid not paying you at all, you might as well start a bank because, in effect, you're financing their cash flow problems.

Don't let someone else's cash crunch become your own.

3. Manage Risk

Every organization faces risk. Some you’re well aware of, but others may be hidden. When the business environment gets tough you need to stop and think about what can go wrong. The good news is risk surveys can give you an idea where to look.

When you identify, assess, quantify, and mitigate risk, you can reduce uncertainty.

4. Reduce Uncertainty

There is no question that uncertainty created by partisan politics is pushing a lot of business owners to sit on cash. But you have to continue to operate, even in an uncertain environment, if you and your employees want to eat.

How do you do that? Start with where you want to end up and work backward to define the activities, development, expertise, and technology you need. Then work from the bottom up.

The process is simple, but that doesn’t mean it’s easy. And you do have to keep generating income and protecting your business while you’re planning. The process will reduce the uncertainty and keep you from wasting time trying to get better and better at something you shouldn’t be doing at all.

5. Don't Compete on Price

Discounts only make sense if there are economies of scale that will allow you do deliver the same product or service at a higher volume, or if your marginal cost is low. If you offer rickshaw rides, a discount simply means you make less. If you offer bus rides, carrying a few extra people won’t cost you any more so a discount may make sense.

The same is true if your business can upsell a new customer, or if a discount customer will come back as a full-fare buyer.

But if none of the above is true, don’t discount.

A lot of merchants who use Groupon haven’t figured this out, by the way.

6. Be Agile

Argentine revolutionary Che Guevera once famously said, “Where there is confusion there is opportunity.”

While others are pondering what to do, take steps to make your company better able to respond quickly to change:

Don’t cut staff; cut bureaucracy;
Focus on value and cut waste;
Find ways to increase productivity and cut non-performers. (Teleworkers, for example, are repeatedly shown to be at least 25 percent more productive than their office counterparts. Manage based on results – not where, when, or how they work – you’ll see involuntary turnover go up, and voluntary turnover go down).

7. Just Do It

Sure times are tough, but aren’t times always tough for a small business? You can bide your time and assume there will be another upswing, but by then maybe the US will have more debt, China might be an even bigger player, Congress will still be gridlocked, and terrorists may still be terrorizing. Are you sure there will be an upswing? Maybe this is the new normal.

Some people sit around and wonder what’s going on. Others understand what’s going, but don’t do anything. Meanwhile some people step up and make it happen.

Which are you?

This article is from Tom Harnish of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: