A few billion here, a few billion there … pretty soon the bailouts add up to some real money! Financial stocks are getting junked. Maybe your portfolio has a few. Maybe they're worthless now.
If that money is gone, it's gone.
But if you have a job (as I do) you can make more money, and perhaps invest it a little bit differently this time. Even better, if you have several sources of income (as I do) you can make more money, and start investing again.
But if those income sources go away — that is, you lose your job or lose a big chunk of your revenue — then that could be a catastrophe. If you have a decent emergency fund, it might not be, but otherwise prepare for lean times.
It follows then that keeping your sources of income alive and well during a downturn is of utmost importance. If you're an employee (like I am) make sure that your supervisor knows what you bring to the table for your job. Make sure that when "restructuring" becomes necessary, you're at the bottom of the list of people to fire. Offer to pick up extra work. Offer to take a pay cut should it become necessary. Be flexible with what you'll do. Anything that makes you harder to replace should they let you go.
Even taking all of these steps won't guarantee that you'll keep your job until things improve. That's why it's necessary to forego "spare time" and find the time to invest in yourself. That way, if your main gig goes away, at least you'll have a side business started and the job loss might be less of a setback. The extra income will make whatever emergency fund you have saved up last that much longer. It might even be just the excuse you'll need to quit the nine to five for good!
The market might take away some of what you've already earned, but losing your income might take away the rest of what you own. Protect your income streams.
It's hard to invest in these times and have faith in the economy and stock market. I agree that you should show value to an employer, but you should never say aloud you are willing to take a paycut unless he comes to you and offers that as a last resort to keep your job. If you say it aloud he will go ahead and do so, affecting you deeply and relying more on your emergency fund or to adjust your quality of life.
Craig
http://www.budgetpulse.com
Could agree more. Having and managing multiple income streams is very important. Just like diversification is key for investing, diversifying your income streams is vital for financial risk management.
The instability in the financial markets definitely prove your point-cash flow is king. As long as you bring in enough to cover your needs and whatever other expenses you have, what you have invested in the market and its value "on paper" at a certain point in time is not really that important.
This is good and timely advice. I think it's also best if you're working in (or can find your way into) a core area of the company likes, sales, accounting, product development.
Future tax cuts – how can they promise what events might dictate they can't deliver? Personally I'd rather tax was based on the current need, and I'd also rather pay more tax for better services than get these cuts. Russo stressed the value of consumer brands and express serious doubts about liquidation value currently used many value investors as a downside protection. In today’s legal environment, when it comes time to close the business and tap into the liquidating value, you could have a whole lineup of exit costs eating into the cash pile, including environment dumping costs, labor-related layoff costs, retirement healthcare benefits, executive benefits, and so on.