Many investors have seen their net worth…decline sharply as a result of the current stock market correction. If you are among them, don’t panic. While there is nothing you can do to avoid the stock market from crashing you can take steps to prevent further losses and get back on the road to recovery. Here is a 7-step plan.
The original article from financialculture.com has been edited here for length (…) and clarity ([ ]) by munKNEE.com to provide a fast & easy read.
It’s your money – it’s your future – so take charge today. Below is a 7 step plan:
1. Analyze your losses:
Keep at track of all your losses, initial capital and the remaining capital. It is obviously very painful to observe the figures every time, but so is losing money. It’s better to jot down those figures before you realize it’s too late. Get the actual figures of the amount invested in all your assets, including your house, and the depreciated value. This will give you a clear picture of your losses and left over income. Also keep checking with the credit bureau regularly about your credit report.
2. Set your targets:
You won’t get anywhere if you don’t know where you are heading. The very next important step is to set a short-term goal and work towards it with discipline. If you know you have to repay a loan, don’t just sit around waiting for a financial windfall of some sort to arrive at your doorstep. Start saving a small amount every month and pay off your loan. Start today!
3. Rework your budget:
Saving a small amount every month to pay off your loan will be impossible, however, if you are still stuck with your old spending habits. Start eliminating your superfluous expenses, start prioritizing your shopping list, start cutting down your party expenses and do what ever it takes to save a penny. Generate a new budget for this month before you go shopping today!
4. Stick to your budget:
Planning a new budget won’t help if you don’t adhere to it. At times, it may be very difficult to resist spending extra dollars due to your compulsive spending habits but it’s time for you to change your habits, at least till you repay your debts. Resist – you are the beneficiary. Take the pain – it’s your money!
5. Revise your budget every month:
Yes, you have to do this. This will reminding you that you are in a recovery mode. Keep changing your budget according to your needs. If some expenses are not absolutely necessary, eliminate them in your new budget. Don’t increase your budget much, if at all. Remember, you have a savings target to achieve!
6. Earn more:
If you have time to spare, try not to indulge in unnecessary activities. Instead, take on additional work to double your income. You can do this by working overtime, working part time elsewhere or starting a small home based business. Do whatever you like but generate money from your free time. Don’t fall for those ‘get quick rich’ schemes, though. We are devising a plan to earn more, not lose more!
7. Set your new targets:
Once you see yourself achieving your short-term goals, set some long term goals.
a) Try to generate a bigger picture of your goals.
b) Re-analyze your losses and income, your improvement and goals.
c) Try to switch your investment from high-risk to low-risk sources.
d) Go for a retirement fund instead of stock market.
e) Save every month.
f) Generate your own income.
The above 7 steps will not give you a quick financial boost. Rather, they are presented to help you recover from your losses. Remember, it is imperative to:
- understand your current financial situation,
- devise a plan,
- constantly improve the plan,
- execute the plan to the letter,
- implement the plan immediately,
- persist in the effort
- and be patient.
The process can be a bit long and slow-paced, depending on the depth of your losses but remember, it is your future and you are worth it!
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