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The Top Three Ways to Prevent Financial Setback

by Don Current on August 16, 2010

Downward Trend

Photo courtesy Andreas Levers

I use to do my business accounting online. One of the added benefits, besides being free, is that they have a very active community. One user posted the question “How have you overcome a financial setback?”. That was an easy one for me. You can read the story here for more background on our “financial setback”.

First of all, you have to live on a budget. If you’re not on a budget making an adjustment to a reduced standard of living is going to be extremely difficult. It’s not necessarily easy even when you know how to live on a budget, but at least you have the tools you need in place.

Secondly, you’ve got to have minimal debt. If you’ve got car payments, and mortgages, and lines of credit and business property payments to be making each month, you’re going to struggle to make the bills each month. If you’ve been operating debt free both personally and professionally, you can keep your focus on the basics like putting food on the table and making the mortgage payment if necessary.

Finally, you’ve got to have an emergency fund in place for your personal expenses as well as for your basic business expenses. Three to six months worth of both living and operating expenses is recommended to smooth out the bumps.

If it weren’t for these items being in place when my factory closed, I would probably have had to take the first job that came along instead of launching my own business. I much prefer setting my own direction rather than being tied to the whims of a company or the economy. How about you?