“I don’t know if you’re aware or not, but there’s a powerful storm headed our way”, the older gentleman said.
The local resident could tell we were from out of town.
After all, we were still sitting by the lake enjoying the beautiful evening at the cottage while most others were inside watching the storm updates.
We could see dark clouds off in the distance, but nothing looked too threatening.
He walked several houses down to where we were staying to make sure we knew the storm was coming.
“The last one that rolled through here knocked our power out for four days,” he said as if to emphasize the fact that we better take heed.
We spent the next half hour picking up our chairs, rafts, and towels and started tearing down our canopy. We didn’t want anything flying away.
Within moments after we walked inside, the rain hit.
Magnificent displays of lightning lit up the night sky and loud cracks of thunder rattled the windows. As the electricity flickered several times, we were thankful for the old man who gave us the advice to prepare for the storm.
Recently, we’ve seen the U.S. Debt Crisis unfold with loud cracks of thunder. Lightning bolts have burst forth throughout global markets.
Today I want to offer you some basic advice, just like the old man at the cottage, to help brace yourselves for the market storm.
We don’t know what’s in store or how long it will last, but here are six things you should continue to focus on as the market storm rolls through:
1. Destroy your debt
Just because the U.S. Government is seemingly careless about it’s debt overload, doesn’t mean you should follow their lead!
If you’ve gotten off course in getting rid of your debt, it’s time to get back to square one. Do what it takes to destroy your debt!
2. Spend less than you make
It doesn’t matter how much income you earn; spend less than you make in order to get ahead!
Yes, it’s that simple.
3. Be more generous than ever
It’s easy to fall into the trap of thinking we must hoard our money during rough times, but God challenges our paradigms. He is our faithful provider.
More people need our help in this economy, so put yourself into position by becoming more generous. This might mean you start by creating a generous budget.
4. Save 10%-20% of your income
Building wealth the right way requires that you save money consistently over a period of time.
If you’re not saving at least 10-20% of your income, then push yourself to get to this point as soon as possible.
5. Diversify your portfolio
You should look at diversification from the “PITT”, or four different standpoints:
- Product – Diversification of products simply means that you utilize different types of investment vehicles. Some products offer guarantees (with fees of course), while others offer downside protection etc.
- Investment - This means you diversify your portfolio with stocks, bonds, and alternative investments. You may want to look for defensive positions during difficult times like dividend-paying stocks, consumer staples, or precious metals.
- Time – This means you have short, medium, and long-term investments. Should something happen to your job, you won’t have to take an early IRA withdrawal because you’ll have short-term investments to help weather any additional storms.
- Tax – Diversification from a tax standpoint means that you work at balancing tax deferred, “taxed now”, and tax-free accounts (think Roth IRA).
6. Diversify your income
I’m more convinced than ever that we should find ways to diversify our income so that we are not reliant upon any one stream too much.
Certainly we will always have one main stream to provide us with our income, but having a side business, a dividend portfolio, or other potential sources to make additional money is key.
What other advice would you give to help weather the market storms?