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Fixing Your Own Economy


If you read the news today or listen to talk radio, you will most likely hear some mention of unemployment and how bad the economy is. I disagree, the economy is in great shape. You just need to look after yourself to ensure your personal economy stays on top.

Education

Education is the core to most people's financial success. If you look at top CEOs today, almost every single one has a college degree. Many of them have master's degrees. Most of them went to business school or have an MBA. This is not a coincidence.

If you want to keep your economy stable, you need an education and a degree that will lead to the future you want. I am thrilled that so many people want to be social workers, but a $60,000 master's in social work from a private university will likely make you $25,000 per year. Is that warm fuzzy feeling worth it?

The same university offers an MBA for the same cost. That degree will leave you making double what a social work degree will make you.

History degrees, art degrees, English degrees, and other liberal arts do not have a bright future today. Unless you want to be a teacher or go to grad school, these degrees will help you land a job with good benefits at Starbucks. Make sure you know what you are getting into when you pick a major.

If you don't believe me, this graph from the Department of Labor breaks down the numbers.

Savings – Emergency Fund

Even the strongest economies often hit hard times. The United States has had a Great Depression and a handful of recessions to keep us on aware of what can happen if you do not have strong momentum.

But, just like a strong economy, you can hit hard times. I know a whole lot of people from my former employer that were laid off after it was purchased by another company. People with law degrees, accounting and finance degrees, and MBAs were laid off just like everyone else.

While these people have better odds of finding a good job than someone with a high school diploma, they still have to pay the bills and support their families in until that happens.

If you are young and single, you need an emergency fund that can cover at minimum three months expenses to have as a backup for a rainy day. If you have a family to support, you should build an even bigger cushion to ensure you can make it through tough times.

Retirement and Investments

New businesses open everyday, and old businesses close everyday. Whether they were forced out by competitors or decided to close up shop to pursue other adventures, if they were run the right way, they have a good nest egg behind the operation.

You need a strong nest egg too. When you are ready to close up shop and take up a full time golf and sailing career, you need to have the cash in the bank to get you where you want to go.

I invest over 10% of each paycheck automatically into a combination of savings, investments, 401(k), and Roth IRA accounts. If you do that for the duration of your career, you should be in good shape when retirement comes around.

Insurance – Health, Life, and Everything Else

If the economy gets hit with a terrible event, the government and taxpayers have to foot the bill to keep things going. Unfortunately for you, the government and your neighbors will not hand you money to keep going when times get tough.

Make sure you have health, life, auto, homeowner, and any other insurance you need to protect yourself and your family from unforeseen catastrophe. As I recently learned, a $600 illness can cost thousands if you are not adequately covered. If you are an entrepreneur, you may also need to purchase business insurance.

Budget

If you are wondering how you are going to pay to keep your economy going strong, look no further than the trusted budget. If you keep your spending under control and focus on the end goal, you can find a balance between income and expenses that should keep your economy chugging along no matter what life brings you.

If you have never used a budget, take a look at Mint.com or Adaptu as great personal finance tracking tools that will automatically keep you on the right path.

Multiple Income Streams

Okay, okay. I know everyone's situation is different. Maybe you don't make enough money to support your lifestyle. While I strongly believe everyone has the ability to live below their means, many people live beyond what they can afford anyway.

You can be like me and try to turn hobbies into income and make multiple income streams. I know many stay at home moms that have built successful blogging businesses. I know full time workers that have a photography gig or weekend business. I even run a flash mob business when I am not working.

You can easily come up with a way to make more money. If you are struggling, I recommend Ramit Sethi's Earn 1k course as a good place to start.

Don't Forget to Have Fun

I know all of this might sound stressful and difficult, but if you make a list and knock things out one at a time, you will be all fixed up in no time.

Image by epicharmus.

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