Crash or Not be prepared 

As you may have seen from our Facebook page I have been wondering if a crash is about to hit the stock market and housing market.  At the same time there have been so many articles in the papers recently that it is unlikely that a crash is as close as I first thought.
However it is never to early to prepare.

First you need to reduce your spending on items you do not need or can get at a cheaper price. Such as not buying coffee out and making your own at home or making meals at home rather than buying lunch when you are out.

Second you should set up a small emergency fund that should be somewhere between £500-£1000 so that if something urgent happens you can pay for it without taking on more debt. It is critical that you complete this saving plan as it will set you up for the next stage.

Third you should start paying off your debt excluding you mortgage. You should carefully consider what to pay off first. I would start with your highest balance highest interest rate debt or you could start with the highest interest rate debt the other option is the smallest balance debt. Although you may not be paying off the highest interest rate debt you should be able to clear this debt quickly and this will add motivation to pay off the other debts. Do not forget to keep paying the minimum payment on all debt.

Fourth once all the debt is cleared all the payments that were previously used for debt should be put into an emergency fund that should be held in a cash saving account with instant access you should build up 6 months worth of after tax pay in this account . Make sure that you do not lock this money away so it earns a higher interest. You may need this fund in the future. Also please do not invest this money in the stock market or other investments as you may need it at a time when the markets and prices are low.

Fifth make sure you are paying into a pension scheme. If your employer has a pension scheme and matches your contributions or some double your contributions up to a certain level then you should try to max out this contribution. You should try and pay 10-15% of your salary in a pension.

Sixth start saving and investing so when you wish to buy something you never need to be in debt again. By the time you have got here you should be able to manage your finances and concentrate on your career or business along with the final stage. Once you are happy you have a reasonable nest then you should move on to the final stage.

Seventh start paying off you mortgage. Once you start seeing the balance come down you will be amazed how quickly you can pay off the balance. It is always a good feeling to know you own your own home.

If you follow these stages you should be very well prepared for any oncoming storm in the global or your local economy. It is never to early to be prepared. Once you have got to these final stages you are on your way.

Let me know if you have any ideas.

The Normal Person

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