6 Ways To Profit From An Economic Downturn
Don't Let An Economic Downturn Ruin Your Wealth Growth
Key Ideas
- How to find opportunity… even in rough economic times.
- 6 actions you can take today to grow your wealth despite the economy.
The easy response to an economic downturn is to become despondent.
But easy is seldom profitable.
Successful wealth builders take the road-less-traveled by seeking to find the best in a difficult situation.
Rather than use the recession as an excuse for poor performance, the wiser choice is to realize that dramatic change has occurred – and change brings opportunity – even when it includes difficulty.
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Even in a recession, you can find clever ways to extract economic advantage and position yourself for the next economic recovery.
Not all times are good, but if you want to lead a wealthy life, then you would be wise to learn how to find the good in every situation. That includes the bad times associated with an economic downturn.
Below are 6 ways to make the best of tough times…
- Lower Your Costs: Whether you're running a business or running a household, now is the time to cut costs and become a lean, mean, cash flow machine. Eliminate redundant employees and replace marginal employees with better quality from the plentiful job market. Also, find lower-cost providers for services and goods, and cut every form of waste and fat. When you waste nothing and use every resource to its maximum advantage, it's good for the environment and even better for your bottom line. Now that business is slowing down, use that extra time to lower your costs and improve quality and efficiency.
- Own Instead Of Rent: With real estate prices down and interest rates low, it may make sense to purchase your office or home rather than renew the lease. The economic relationship of rent versus own has changed dramatically in the last two years. Most accountants agree that if your time horizon for using the real estate extends to 20 years or more, the scales will usually tilt in favor of ownership. Check it out.
- Bargain Shop: Many vendors are offering steep price concessions. It seems everyone is having a sale, but you have to ask for the discount. You'll be amazed by how much money you can save just by asking for a discount. Try it for a week.
- Add To Your Portfolio: The best time to build your portfolio is when investments are beaten down and valuations are strong. There's an inverse correlation between long-term investment returns and the valuations of the market at the time you acquired your portfolio. The lowest valuations have the highest expected returns. Build your portfolio when securities are “on sale.”
- Refinance Debt: Interest rates are bouncing off historic lows. I recently refinanced my home with a 4.75% 30 year fixed rate loan… unbelievable! At that rate, I can't ever imagine wanting to pay it off. My investment returns greatly exceed that rate, and inflation is highly likely to approach or exceed that rate over the lifetime of the loan. What that means is they're effectively paying me to borrow the money when they offer rates that low. Locking down unrealistically low, long-term, fixed rate mortgages is an extraordinary opportunity in today's recessionary environment. This is one of my favorites. This strategy applies to investment real estate as well as your personal residence. The key is it must be a fully amortizing, long-term, fixed rate loan. No balloons, variables or other hybrid loans are allowed.
- Take Advantage of Government Boondoggles: I personally despise all the government bailout and incentive programs. There's no reason the taxpayer should be going deeper into debt to encourage consumers to purchase cars (Cash For Clunkers) or homes (First Time Home Buyers Tax Credit). However, like it or not, these industries are favored by the government. If you're already in the market for a car or first home, only a fool wouldn't take advantage of these government handouts. Don't respond to these incentives by creating demand, but do use them if you were already considering a purchase. I may hate the game, but as long as the music is playing you should be smart and do the dance.
In short, all times are good times if you just know how to position yourself to find the good that's already there. Hidden behind the doom and gloom of this recession is plentiful opportunity if you just know where to look.
I'm not saying these aren't tough times, but smart wealth builders know how to harvest opportunity in every economic environment.
Do you have some other suggestions I overlooked?
Please add to this post in the comments section below by sharing your favorite way to harvest opportunity from the recession…
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