Over the past seven or eight years, right across the world, many people have felt the negative effects of the fallout from the international banking crisis. Although such a drastic downturn thankfully doesn’t happen all that often, the ebbs and flows of the financial world mean that economic downturns of different shapes and sizes do come along quite regularly.
If there is a real estate boom and bust cycle, or there are job losses or stock market fluctuations, there are plenty of chances to be hit by bad luck when it comes to finance.
However, the old saying goes that “every cloud has a silver lining,” and some people seem to have a way of making good fortune come about while others miss out.
How can we all learn to use an economic downturn to our advantage?
Of course, even the best-laid plans sometimes go awry, but when it comes to personal finances, there really is no substitute for a little forward thinking.
If you have some fluidity in your funds – perhaps from cash savings or easy to access bonds or stocks – you can not only rest easy in the knowledge that you have a safety net to cover any tough times, but also that you can move quickly to take advantage of a given situation.
Paying down debts always makes good sense, as interest costs can quickly become crippling in the face of unexpected hikes, and long-term interest payments really do add up.
When money is tight and people find themselves in difficulty, property usually falls in value. This is because owners have to sell up and downsize, and in the worst case scenarios, foreclosures mean lenders take possession of real estate they don’t actually want.
However, bricks and mortar always seems to bounce back, so one way of using a downturn to your advantage is to buy into a market when it is down.
For property, this can be a difficult thing to judge, but if you manage to buy when the market has bottomed out, you can see fast returns on both capital and rental values when things start to rise again.
This is where having some easily accessed funds can really be a help, as cash buys are always favored, especially at times when credit or home loans may be harder to come by.
A similar market economy works most famously in the stocks, shares, and commodity trading centers around the world.
Entire economies can hinge on the rises and falls of Wall Street and other famous stock exchanges, and once again, the clever and canny operator can usually turn the bleakest scenario into a gold mine.
Private equity firms are some of the best exponents of this craft, and US-based firm Stephens Inc. is a perfect example. Chairman Warren Stephens exemplifies the way in which being decisive is an essential skill needed to capitalize on opportunities as and when they arise.
Well known for the way in which he used the financial crisis to carve out a niche amidst the madness that saw huge institutions fall, Warren Stephens continues to be a respected and imposing presence on the US and global financial stages.
Expanding against the tide
Another way to take the initiative is to expand when rivals are contracting. Depending on the area of operations of a business, this might simply be impossible under certain circumstances because demand drops off a cliff, but for many, taking the brave path can reap rewards in the long term.
If your base country of operations has a currency that is weak, it means your goods and services might be more attractive than ever to overseas clients and customers. Likewise, in times of high unemployment, it might be possible to reduce workforce costs without losing out on man-hours.