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Do You Know Your Household Economic Risk?2/5/2016
Learning your household economy may mean the difference between surviving the next financial crises, or not. Is your household economic risk high, moderate or low? If you donít know the answer, you better find out. Remember the buck stops here, there are no excuses! You must begin to realize the importance of investigation, analysis and better predicting your financial future.
No matter what your career, or where you work itís important to listen, watch and investigate your company, the company ownership, company stock, and even your competitors. Is your industry in a growth phase, or is it consolidating. Are your competitors going out of business or are they expanding. Is your industry tied to other countriesí economies? Are your products, goods or services closely linked to other economies that may be struggling? Itís up to you to investigate, analyze and listen for clues, tips and key information that may point to impending doom, or an opportunity to expand your skills and talents by shopping them to competitors.
Today there is social media, internet links and data providing information from all parts of the world for every industry. Itís easy for you to access information, same as every CEO, CFO and company President today. You must learn to forecast and predict what may happen, or what may be on the horizon within your industry. Your financial life may depend on your research, and the action you take related to the information. If you canít see the forest for the trees speak with trusted friends, ask what they think, usually your gut instinct will provide the best feedback.
A company merger may be good or bad, remember to take rumors with a grain of salt. Most often with a merger there will be layoffs, in spite of what the company says, be prepared and take action to protect yourself and your family. Usually a company merger, sale, or closure is never a surprise, so donít get caught making excuses. If you are a two income household could you pay your bills with only one income? If not, how long will your financial reserves (outside of retirement accounts) last? You better say at least six months, if not, then you are not prepared.
Today many households suffer a medical situation that may put one, or both incomes at risk. Seasonal workers often struggle during the off season. Is your company reliant on government contracts, if so when does the current contract expire? Could Congress pass a Bill that would impact your industry? Never believe it canít happen to you. Ask anyone that was working in the oil industry, two years ago they couldnít find enough workers, today many are bankrupt. Is your industry the next oil bust?
Your household micro economy involves all of the above, be sure to understanding what your financial provisions are. Take inventory of your financial house. Build a household budget, have a plan in place, a plan B, and a plan C if both incomes are lost. You must constantly evaluate and make sure youíre prepared.
Itís so important to pay attention, use all your resources and learn your household micro economy, analyze and predict, your financial life may depend on it. You must think like you live on an island, there is no help, only you. Ask yourself today: Is my household economic risk high, moderate or low? Whatever your answer is, make sure you have a plan to protect yourself and your family.
Phillip Day, President
Academy of Financial Literacy, Inc
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