Mark my words, we are at the top of this economic cycle, and starting to trend on the back end of the peak. Interest rates are rapidly rising, the stock market is starting to correct, real estate sales have slumped several months in a row, and we are experiencing one of the longest, if not the longest periods of economic expansion in US history. Do you need any more signs that we’re going to need to let off some steam soon?
You know it’s true. We are living on borrowed time and the market will cycle the other way soon. But I’m a practical guy, and don’t buy into fear mongering and so let me give you some practical tips to ensure you’re ready for the dynamics of this next cycle, and if you position yourself well, you might just excel!
Pay off and/or reposition your unsecured or underperforming debt ASAP. Credit cards – the interest rate climb has really affected these rates and you may be paying 20% or more on that debt. Two suggestions: First, check to see if other cards you own have a balance transfer promotion. You can often get a 0% balance transfer offer if your credit is decent from a credit card that would like your business. Look for promotions to open new credit cards with this offer as well and transfer your balance to that new card. I checked yesterday and several of the majors are offering this promo right now. Remember, if possible, keep your credit card balance under 50% of the max credit limit to keep your credit score in check which gives you more options. Second, check with your local bank to see if you can get a personal or business loan. You’ll be paying 6-7% on that, though that’s a heck of a lot better than the 25% on the credit card. And they will likely fix that rate over 3-5 years protecting you from further (likely) rate rises.
Sell assets you’re not using. Now is the time to sell that stuff, and it will be nice to have the cash. I’m talking big stuff like real estate that is not cash flowing (now is the best price you’re going to get for a while) and small stuff around the house you don’t use. If you’re like me, you have several hundred, maybe thousand dollars worth of stuff around the house you don’t use anymore. Use Facebook Marketplace, eBay, Craigslist, and get rid of that stuff. We’re entering the holiday season, good time to sell!
Save that cash you made selling stuff. Open a money market, or put in a CD, something you can access quickly that has downside protection. Winter is coming. Are you prepared with a little cash on hand?
It’s tempting, but don’t make any big purchases you don’t need. Stuff is going to get a lot cheaper soon. And most certainly, don’t take on any more debt right now. The exception would be a piece of real estate that cash flows, or a primary residence you’re confident you’re going to stay in for 5-7 years.
Keep your retirement assets in the market. You’re playing a long game there. You have plenty of time to wait this out. Unless you’re around 70, then work with your planner to make sure your assets have downside protection and are in conservative vehicles.
Stay positive. The wealthy know there is often more opportunity in the down cycle than the up cycle. Be ready to grab yours! Baron Rothschild an 18thcentury British nobleman, and Warren Buffett have both said, “the time to buy is when there’s blood in the street.”
That time is coming. Be ready.