Preparing Your Finances for This Economy

Right now, it is of vital importance to prepare your personal finances for this economy. Preparation is key if you want to get through this relatively unscathed. Two of the main points of concern for many people right now are:

1. Employment
2. Debt

Is your job safe?

Today’s announcement that Citi is planning to cut more than 50,000 jobs in addition to the already-cut 22,000 jobs is not exactly instilling confidence in the economy — especially since unemployment is approaching recent highs. (Citi, though, plans to try and save executive bonuses, unlike Goldman Sachs, which has announced that execs will be foregoing bonuses this year.) To this end, it is no surprise that many people are becoming concerned about their jobs.

If you are worried about job loss, My Dollar Plan has some excellent suggestions for preparing for the possibility:

• Review your benefits and consider your health insurance options.
• Check your cash flow and start now to figure out where you can cut costs and how you can increase income from alternative sources.
• Be prepared to take action when it comes to a severance package, getting help, figuring out financing and making sure your credit is in order. Make any credit repair you may need.
• Prepare for the job market by updating your resume and dusting off networking contacts.

It’s never fun to contemplate losing your job, but it may become a reality, and preparing your finances for the blow is a good idea.

Debt and this economy

The other concern that many people have is related to debt. Our consumer culture has been on a debt-fueled spending spree for the last 20 years, and it’s catching up with a lot of us. It’s no surprise that people are looking at their crushing amounts of debt and starting to worry about what happens in an economy where they could lose their jobs.

As with preparing for possible job loss, trying to reduce debt is important. You need to start a debt reduction plan now, doing your best to get ready for what may be coming. This means that you need to cut back on unnecessary items, and do what you can to live within your means. And you need to apply leftover income to your debts. Debt has a way of magnifying other economic issues, and if you can get your debt to a minimum, it will leave more money free to take care of other problems.

And, of course, building an emergency fund will help you prepare for any personal finance storms that may come your way.

What are you doing to prepare your finances for this economy?