There is an old saying that a drowning man will grab an anchor if someone throws it to him. This is because desperation leads to decisions that are not always sensible. During a recession, for example, families facing financial difficulties sometimes attempt to improve their economic standing by making choices that don’t help them. Here are some mistakes to avoid during economically challenging times to help you work toward recession proof living.
1. Beware of starting an MLM business with the thought that it will be your main income.
One of the first things that people think to do when cash strapped is to start their own business. The most alluring of these kinds of businesses is the Multi Level Marketing (MLM) business. There are several ways that MLM’s attract future members. First, they offer incentive for you to come to a meeting, then some higher level "executive" talks to you, usually from a remote location, about the wonderful happenings in their life now that this company has become their passion. Finally, they tell you about how you are a winner, how everyone else that rejects this company just doesn’t have what it takes, and how soon you will be living in the lap of luxury, just like they are.
Most businesses take several years to become financially solid, but MLMs traditionally take even longer, and sometimes never even come to fruition. Dr. Stephen Barrett of Quackwatch.com cites as an example, in his article "the Mirage of Multilevel Marketing," a court declaration by a expert Robert Fitzpatrick concerning Quickstar. Fitzpatrick state unequivocally that "99.4% of all Quixtar distributors earned an average of $13.41 per week before product purchases, business expenses, and taxes, with the result that 99% of them made no profit."
Whether the business is selling health products, baseball card pictures or wamboozles, the point is that unless you feel completely excited by the product and it is your life for some reason, it’s tough to pitch it to other people and develop it as a business. On top of that, most MLMs encourage you to pitch the idea of joining the business to colleagues and friends at a time when you need them the most for networking lucrative positions.
2. If you have to take a second job, avoid taking one that is out of your field and pays poorly.
In times of economic emergency, you might want to focus on more conventional means of getting a paycheck, so you take a second job. One of the biggest mistakes is to accept a job that doesn’t use your skills, education, nor has the earning potential you deserve. Figure it this way: if you already work a forty-hour-a-week for $18/hour, why would you settle for a second job for $6/hour? For example, a local school counselor took an evening job running the till in a grocery store. Not only did she have to work three extra hours to match her professional salary, she also ran into the students from her school. While some people may not have cared if she worked a second job, others may have wondered if a college degree was worth the time and money. What good are years of education if you had to work a second job after all? That kind of job provides nothing for a resume and makes you more tired.
Instead, concentrate on finding other well paying income sources. For example, a teacher could find online tutoring, a mechanic can work after hours on his own business, or a nurse can work for insurance companies as a data collector. Sometimes these positions can even provide valuable contacts in case you are laid off from your regular job in the future, providing means for recession proof living.
3. Before taking a second job, trim the fat out of your budget..
Nice things cost money. But holding down three jobs just so you can always have the latest gadget or eat at the fanciest restaurants frequently is crazy. If you don’t know how to write up and use a budget, find the local consumer credit counseling center and ask them to help you. Let them teach you how to successfully budget. It doesn’t matter the size of your paycheck. Hyperinflation, if it happens, can eat you up so fast you won’t have time to react and prepare. Now is the time to do that.
Learning to live more frugally during difficult economic times is actually something you may have to study! Check out the hundreds of excellent blogs all around the web on frugality, and you will come up with excellent ideas about how to become more savvy with your cash. Just go to Amazon.com and type in Frugal living, and suddenly you will come up with a dozen good books. Choose the ideas you like, and make them benefit you! But don’t forget, always find a small way to treat yourself throughout the week so you don’t end up blowing a budget. All people deserve good things, too, they can just cost little or no money.
4. If you get laid off, don’t waste a single moment taking time off.
When economic times are good and you get laid off, feel free to spend some time reflecting about your personal traits that may have led to your dismissal. During tough economic times like these, job layoffs are due to events beyond your control. Don’t sit before looking for work, as you may need every moment to find the new job. Even if you have what looks like a solid job, get a good interview suit, pick up any additional training to keep you updated in your profession, and start networking.
If you do lose your job, this is the time for friends. Contact them and tell them you need a job. They can listen for company openings and having an insider recommend you can sometimes help your employment chances a great deal! "Beat the bushes." Call companies and ask if they have openings that might fit your background. Remember to find a good fit for your personality and core beliefs, or the job may not last.
An online article in HR Guru summed up the problem of getting hired in a tough market by saying that it’s more often who you know than what you know. Often employers get so many excellent applicants, that during the interview process, they actually are looking for the smallest details about you. Does your pen look professional? Do you have a nice folder? Do you look sharp? Human Resource Managers want people who will fit in their corporate climate. That is very hard to adjust to; you often either fit or you don’t.
How you approach a job is critical. Novel approaches to stand out are tempting, but in most situations, the HR department will write you off as having bad judgment. Many times getting selected is a matter of fate. HR managers are known to take the bottom half of the applications and throw them away because there are so many qualified people who want the job. Keep all these things in mind while pounding the pavement. It can help keep you from getting depressed.
5. If you have to take out a 401k loan, make it a small one that you can pay back easily.
In times of economic difficulty, it’s very tempting to borrow from your future. Suze Orman, the financial adviser featured on CNB, and the author of "The Road to Wealth," believes that people should never borrow from their 401k for several excellent reasons. First, if they can’t pay it back, there are nasty consequences from the IRS. Second, it robs you of the valuable time you need to build up your savings for your retirement. However, when you need to feed your family, and all of your options are gone, that stash of cash looks very tempting.
If you simply must borrow, don’t take out a full year’s salary. Perhaps a loan could pay off your credit card before you put the offending card into a carton of water, then into the freezer. Or it could pay for six months of mortgage payments so you don’t lose your house. It’s tough to find a new job when you don’t have a residence. Keep that borrowed amount manageable and pay it back as soon as possible.
The economic times we are now encountering are brand new. It will be different from the tough times in the 1970s and completely different from the Great Depression. Common sense will be the greatest friend you have during a recession. Let’s hope that you will not make any serious career mistakes during this economic downturn.