We are currently having the greatest recession time in our history. There are so much of things we must do right now to reduce the damaging effect on our wealth and future. But there are things we must do too to prepare for the next recession.

Prevention is better than cure and this theory is really good. You and I already knew how it feels in recession period and what are the side effects that can damage our dreams, retirement plans etc. So we must do something to prepare for the next recession so that we won’t have such a tough time again.

Recession will happen again

History tells us that recession can happen again and again. In fact, it is part of the economy cycle that we can not avoid. We cannot do anything but have to prepare ourselves and our assets for the next recession. At least we must prepare our business, retirement funds, personal finance, income and any other financial products for this great event in future.

What is Important In Recession?

Before we take any actions, first we must know our target and goal. These are the things that are very important for everyone of us to survive in recession period:

• Cash. Cash is king in recession. Nowadays most of us are living in credit. We buy things through credit cards, get loans for college, house, cars etc. However, this is very dangerous if we don’t know how to manage our credit properly. Credit is useless in recession. In fact, less and less businesses are willing to give credit out during recession. Therefore a new phenomena will appear where cash becomes king again. This is why I will strongly suggest you to always prepare some cash for emergency period like recession.

• Income sources. In my previous post , I mentioned that there are nothing really secure forever, even our jobs. This is what I learn from this recession. Great layoff happens in recession and most of the businesses are slowing down. Our income might loss in this period. This is a big problem because our life are on risk if we lose the income. This is also why there are so many people having emotion problems during this recession period. Therefore we must know and figure out a way to protect our income source or  have multiple income source that can support our life even in the hardest time in our life.

• Basic Assets protection. Besides cash, there are something that we need to survive. For example, our houses. We must prepare ourselves to keep our houses and pass through the recession period. As you can see, great foreclosure happens in this recession and this has told us that something is not right. Maybe most people tends to buy a house that they cannot afford due to high commitment or maybe they are not preparing any emergency fund to pay the installment just in case they lost they income sources in recession. So we must learn the lesson and only buy the assets that we can afford. Besides that we allocate some extra cash ready to support our valuable assets during recession.

Now we know what is important and we must focus on those 3 things above. In fact, our preparations are most likely focusing on them.

How to Prepare for the Next Recession?

There are 5 steps you take and repeat again and again to prepare for the next recession:

1. Setup your saving and emergency funds. As I said, cash is king. So we must prepare some cash as the foundation for our personal finance. First you must know how much you really need to survive. You can know this by carrying out a budget for at least 3 months. Then you will know how much you really need to survive. My suggestion will be save up 6-24 months of emergency funds is the best foundation for financial security purpose. This is because it really takes time for our economy to come out from recession. The more you have in emergency fund, the more financial security you can have.
2. Live below your means and Only Buy Things that You can Afford. One of the common mindset that I found among the people around me is that they tends to spend every penny that they have on hands. People like to do their calculation using 100% of their income. They never leave a room and space for their finance. This is why they have financial problems. In order to have a good financial future, we must learn how to live below our means and ONLY buy things that we can afford using the less credit! Along the way, the more money you can make, the more income your have, you can raise your standard and also the quality of your life. But before you build up the financial security, you are not encouraged to raise your standard of life. Yes I know it is not nice to stay below your means but this is the sacrifice you have to make for a good future. You suffer now but in future you are can enjoy your life for a long time.
3. Reduce Your Debts Burden. Debts are burdens, risks and bombs for our life. It only safe as long as you have money to pay it. But what happen if you lose your income during recession? This will be a big problem for your life. Therefore, you are advised to reduce your debt burdens so that your life is not risky. Anyway, if you can buy according to your ability and using the less credit, then you are quite safe and stable in your finance.
4. Build multiple income sources. Don’t put all your eggs into 1 basket. This is the advice that we usually hear when comes to investment. But this theory also can be applied in our income. This is because nothing is really secure during recession especially our job security. We must learn and work hard to build multiple income sources. First, this can let us generate more money at the faster speed so that we can build a stronger financial foundation. Second, we can have multiple income during recession and have more security for our income. Some of the incomes that I recommend you should learn and build besides your job are business income, passive income, residual income and investment income.
5. Increase your financial literacy. Recession is a good time to gain more wealth and make more money. However, this only can happen if you know how to manage your money and leverage the power of your money. This is all about increasing your financial literacy. From today, you can spend a little bit of time, maybe 20minutes per day to read something about finance. It can be a book, a magazine or study the news. This is the most direct and easy way to increase your financial literacy.

Reminder for You

There are many ways to prepare your finance for the next recession. However, it will be useless if you don’t take action and follow the plan. What I usually worry is people will go back to their old spending habit when the economy is alive again. If you don’t learn the lesson and take the action, you will suffer again in the next recession. So we must always remind ourselves and get ready for the future! Remember, the foundation of personal finance is very important as it can greatly affect our life and future.

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Nowadays, running a business is not as easy as before. Today, markets are going to be more and more saturated for any kind of businesses. Great competition happens within entrepreneurs for different kind of business fields.

The one who can win the competition is the one who can own the most market share and make the most money out of the market. Therefore, if you want to succeed, you have to fight for market share. Yes, it might sound hard to do so but if you know the key, it can be really easy for you.

They key to win your competitors in any kind of business is Good Customer Service.

Good Customer Service is the best way to keep Your Customers

Customers are one of the most important assets for your business. In fact, they are the one who pay you money! So the theory is quite simple. The more customers you have, the more money you can make from them. This is why many companies spend so much of money in advertising just to attract more customers to their businesses.

Attracting customers is only the first steps. What is important is transforming them to become your royal repeated customers. This will be a foundation for your business.

Yes, you can carry out a lot of hot offers or promotions to attract new customers. But if you don’t have a good system to service them, most likely they won’t come back to you. In order to let your business has a long run profitable business, you must keep your customers coming back again and again.

What you have to do is providing a good customer service. This is the best way to keep your customers. There might be thousands types of customers, but all of them only have 1 simple need - is to get someone who is nice and good to solve their problems and let them become peace and happy in their life. If you are the nice guy who can help them to solve their problems and make them become a happy customer, then you have won the competition.

What is the Purpose of Good Customer Service?

Before we can provide good customer service, we must understand what is the purpose we do so. This will be a customer servicing goal for your business:

1. To Build A Good Relationship With Your Customer. One of the common thing we usually do before making any decision to spend money is trying to search for a friend or someone you know. In most cases, customers more willing to pay money to someone that they know and close to. Therefore, the first mission we must do in good customer service is to build a good relationship with the customers. This will let your business become the first choices in their mind when they need helps.
2. To Build Good Brand/Business Awareness. Good service is always a measurement for customers to rank a business. If your support and servicing are good, then most likely your brand will be good too because in customer mind, you are the best business to deal with. They simply believe that you can help them to solve the problems and eventually get the happiness from you.
3. To Win the Viral Marketing Effects. One of the greatest thing about good customer service is you can win a relationship with your customers and eventually they will help you to market your business. They will introduce your business to their friends and families because for them, you are the best.

As you can see, your business will be a good business if you have a good system to service your customers. There are many benefits you can get from good customer service. This is something that you can not miss for your business. In fact, I encourage you to keep improving and pay more attention on the quality control for your servicing system.

How To Provide Good Customer Service?

Different kind of businesses have different system to support their customers. But overall there are 6 ways that you must do or include in your business system to provide a good customer services:

1. Answer/Reply your customer phone call. Phone call is one the most direct way for customer to approach you. So answer their phone and you can get a business. But if you miss the call, you must reply their call and call them back as soon as possible. This will show you that you are caring about them and ready to help them.
2. Keep your promise. Unless you can keep it, please don’t make a promise. Once you make it, you must do and accomplish it. Just in case you cannot make it, you must discuss with your customers and explain to them. Be responsible for your words. This can also let your gain the trust from your customers.
3. Listen more and Talk Less. We have 2 ears and 1 mouth. This is because God wants us to hear more but talk less. The theory applies in business. We must listen and understand our customers then only we can help them to solve their problems. So please listen more!
4. Deal with complaints. Complaints might be bad for your business but in most cases, customers who can complain is usually a good customer that we must keep. When someone complain to you, they are trying to tell a loophole or mistake in your business system. You must take action and deal with the complaints and you should be thankful to the customers who complain too.
5. Be Ready to Give More. You can always shock your customers by giving more. For example, your customer wants to buy product A. So you deliver the product to him and then you set it up and provide a short course teaching him how to use it. First, you can make your customer happy. Second you can show your expertise and build your image in your customer heart.
6. Be helpful and Patient. Not every customer is good. This is a fact. So no matter what happen, we must be patient to serve the customer. Try to be helpful too so that a customer can feel your heart in helping them. Next time your customer will be grateful to have you beside.

You have to Act Fast!

Yes, you have to act fast and build up your good customer service system. Nowadays, customers have more options than ever. Many competitors are trying their best to approach your customers. So you must act fast. Besides that, the rising of reviews web site on the Internet give even more threats to businesses. This is because those web sites help customers to spread their dissatisfaction at the fastest speed!

Therefore you have to setup your service and support system and provide the best to your customers.

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All this time, we only discuss the inflation rate. We care about inflation because it can affect the value of our money. Inflation can reduce the real value of money and also our buying power along the time. This is the reason why it can affect our financial planning and also our retirement. For example,  if you are putting your retirement money in a saving account at 3% interest rate, but the inflation rate is 3% on average, then your money is going no way but remain at the same value in future. This won’t help you if you want a better retirement life. Therefore, we must invest our money in the matter that can generate average returns greater than inflation rate. This is why we must pay attention on inflation and change our financial planning accordingly so that it won’t eat up all our money.

Today the market is different. All this time we are having the positive value in inflation rate. But according to some economists and statistic reports, negative figure of inflation is happening. Negative inflation is what we usually call deflation. Again, this is another factors that can affect our retirement and financial future. We should not take this easy instead we must understand it and change our plan accordingly.

What is Deflation?

Deflation, also called Disinflation, is the opposite meaning of inflation. While Inflation drops the value of our money and increase the price of goods, deflation increase our money’s value and decrease the price of the goods. Therefore you might see the “price dropping” trend happens around the market in deflationary period.

Deflation is a decline in general price level that often caused by a combination of four factors:

1. The supply of goods goes up.
2. Demand for goods goes down.
3. The supply of money goes down.
4. Demand for money goes up.

Understand The Theory of Supply and Demand

In order to fully understand how supply and demand on money and goods will affect our market, following are some of the example that I would like to give:

For factor 1, the supply of goods goes up, let assumes that we usually spend $10 to buy product A. The ratio between the money’s value and goods’ prices are always remained at the same level.

Deflation happens if the supply of product A goes up. For example, we can use technology to double the production speed of product A. At this moment, if the supply of money is maintained at a certain level, then the supply of product A will be overflowing. Sellers have no choice but have to drop the price so that selling speed of product A can be maintained. This is why deflation happens.

This is a good deflation as the price of goods drop because of high production. This can increase the GDP rate and provide even more job opportunities to the market because those factories will demand a lot of labors for their productions At the same time, consumers have their jobs and they can continue to buy product A again and again. In a nutshell, the business cycle is not affected here.

Deflation happens too if the supply of money goes down. Fed’s decision on interest rate will determine the supply of money and how wealthy people is. If Fed raises the interest rate, less money will be pushed out to the market and hence lower down consumers’ wealth. Consumers will become less interested to spend money and hence drop the demands on product A. Guess what, deflation happens again as sellers have to drop the price in order to push the selling

Above is an example of bad deflation. This is because the business cycle is being affected.  When the sales of product A drop, the retailers and manufacturers will be greatly affected. In order to maintain their business, they may cut jobs and big layoff will happen. The problems will go back to consumers because they lost their jobs and become more demand on their money rather than spend it. Therefore, another chain effect happens that can let our economy down.

Guess what, bad deflation happens!

However, if something bad happens to the market such as recession, spending confidence of consumers will be greatly affected too. People will save their money rather than spend it. The demand for money goes up. Since people will not exchange their money for any goods, then the demand for product A goes down. Bad deflation also happens.

If we look back to the history, deflation always happen due to the high supply in goods(increased productivity) without the increasing on the supply for money. One of the biggest deflation that caused Great depression happens in Japan in the early year 1990 where the demand for goods and supply for money are low. It was the worst economic scenario that no body wishes to happen.

The Negative Effect from Deflation, Even Good Deflation

Some people thought that deflation is a good thing since the price of goods are trending down and they can buy some cheap stuff. However, in most cases, many economists and experts are worry about deflation because of its negative impact on our money.

Like what I said, if deflation happens because the increasing of the goods production and make their price drop accordingly, this is a good deflation. However, deflation cannot happen for too long because it can generate massive of negative effect on the market. This is why our board of Fed uses the Interest rate system to control the market’s inflation and avoid the deflation.

The primary effect of deflation is that it can affect consumers’ buying decision. If all the goods drop in price continuously, consumers can feel the trend and delay their spending so that they can get the goods for a better price in the future. This is another starting point for the chain effects on the economy. If the products sales drop, business will slow down and eventually great layoff will happen and hence making consumers increase their demands on the money.

Besides that, if the price drops continuously, eventually companies cannot afford the low price and they have to cut off their employees in order to cut their business operating costs. Again, this will affect the business cycle and hence start the bad economy chain effect.
What You must Prepare for Deflation

Today, we can see that deflation is happening in the market. According to the latest article from Business Week Magazine, consumer prices in U.S. fell nearly 13% in the last three months of 2008. This includes all sorts of goods, ranging from clothing to electronic products.

Deflation for this time has the negative impact on our economy. We are currently having a big recession period and deflation for this time is happening due to the over supply of goods to the market. This is nothing to do with the high production but because of the low demands of people on to the products. Unemployment is getting higher each week and big layoff happens in most big corporations. This greatly decrease the confidence of consumers to the market and they are not willing to spend money. All the business are being affected because of this and this has caused deflation.

So the most important things for us to do now is spend our money more wisely. We cannot assume that deflation will happen forever. So we must buy something that is valuable for us if possible at this time. A lot of great deals are available at this time.

If you want to do some investment, maybe now or sometime later will be a good timing for you to buy assets such as properties, stocks, bonds etc. Deflation will affect the price of those assets and if you have extra cash on hands, you can buy them to build wealth for your portfolio.

If you don’t have extra cash, now maybe is time for you to save up some money on hands. Deflation reduces the price of goods and your expenses should be reduced too. Just remain your lifestyle, spend the same amount of expenses and you can save up some money for your account.

No matter what happen to the market, the basic of personal finance is spend less than you make, save the extra and invest it. This is the basic step to gain wealth and financial freedom. You don’t have to make everything complicated, keep them simple and you can take action easily.

Good Luck!

Today, the market is bad and the unemployment rate is getting higher and higher. If you are the unlucky one and just lost your job in this recession season, you will have a lot of planning to do for your personal finance and future.

In normal financial planning, we are advised to keep at least 3 to 6 months of living expenses. If possible, keeping an emergency fund that equals to our 3-6 months of full income is even better. This is the money that you can use if anything emergency happens in our life, for example downsizing.

Now if you lost your job and you never keep any emergency fund or even including this “disaster” in your financial planning, then you should take action now and compile a better and more completed financial planning for your future. If you can afford, you should consult the financial planners or advisers for their professional opinions. But if you are tight in money and you lost your job in this recession period, then you can carry out the following steps for your personal financial planning.

Keep a record!

Yes, it might be too late to keep a record on your expenses now if you never do it before. You should have completed this before any financial disaster. But in this tough time, it becomes more important for you to know where your money is going. This will allow you to have a clear picture on your cash flow and spending habits. If you never keep a record before, you will never know that there are a lot of tiny, unwanted and not necessary expenses actually taking money out from your pocket. Besides that you will never know how you are going to plan for your finance and future without any information on your income and expenses. We can plan because we have certain knowledge and information on our head that we can forecast what will happen in future. Therefore, you will never make a good financial planning if you don’t understand your current cash flow.

So start from today, just write down how you spend every penny and along the way please analysis what kind of expenses that you can cut or lower down. Keep doing this for at least 15 days to get the first picture of your cash flow. You can continue and keep 30 days of record for better understanding.

Start a budget

You will have a lot of information on your hands after keeping a record for 2 weeks. Just analyze them and you can start budgeting and gain control over your money. You just lost your income source(job) and you should change your spending habits and spend wisely. Now you should only spend money on something that is necessary, important for your life for example foods, cloths etc. But this doesn’t mean that you can eat something very expensive or wear something that is luxurious. You should spend minimum to get the maximum returns. You should control your expenses and lower it as much as possible.

Now you should forget about all the new gadgets that you plan to buy. In this tough time, you should not add extra expenses to your budget.

So start a budget, limit the expenses and spend according to your budget. I wish you can feel the uncertainty and panic because you lost your income. Now you have to spend wisely so that you have enough money to pass this downsizing period. This should be a motivation for you to start a budget. Please don’t complain that living under a budget and below your means is tough. You really have no choices as you just lost your income.

Hold a Family Meeting

You are not alone. No body is alone in this world. Your family is the one who always stay besides you. So please don’t keep all the financial problems from them because they have the right to know the facts.

In traditional family, people think that it is bad to talk about money, family expenses in front of their family and children. Some of my friends even think that parent should take care all the financial problems and the children should only concentrate on their studies. I don’t agree with this.

Today, financial literacy among the youngsters is very low and most of the new generations don’t even know how to manage their money properly. This is why today’s students have a lot of debt even before they get their first jobs! and the main reason is they are never exposed to the financial issues.

Therefore, I strongly agree that parents should let their children knows about family financial problems and status. This will let them become part of the family financial planning and let them have earlier education on money management. Therefore the next thing you should do is hold a family meeting and announce that you have lost your job. This is very crucial and you must do this because you need their supports to start your budget and your plans. You won’t go anywhere if you want to save money while others keep their spending habits and lifestyle without cooperation.

Downsizing is a tough time and you definitely will become stressful. You need supports from others to keep going. Therefore, please announce your condition to your family so that you all can pass this hard time together.

Change Your Lifestyle

Ok, let’s face the fact. You just lost your jobs and if you have no other incomes other than your jobs, then you have to change your lifestyle. Financial Security is what you want to have right now and not financial comfortable.

Therefore, if you have more debts than cash on your hands, then you have to do something on your liabilities. Maybe you can sell your car if you have extra cars in your house. Maybe you can move to a smaller house with lower rental. Or even rent half of your house to others so that you can share you housing burden with someone. Be creative to lower down your debts, your financial liabilities, your expenses and get more cash on your hands.

Cash is king in any financial disaster. I know you don’t wish to lose your big house, nice car or any luxurious gadgets. But I tell you, these things won’t help you in your financial disaster. They are liabilities and they are taking money out from your pockets. In normal day, you have your job to afford them. But today, you lost your jobs and you definitely cannot afford them. So please let them go…

The theory is very simple here: Change your lifestyle, lower your expenses and have more cash on your hands.

Conclusion

Yes, it might be troublesome to keep track your expenses, it can be hard to live with a budget, it can be shameful to announce that you lost your job in front of your family and it is hurt to lower down your luxury lifestyle. But now you just lost your job and don’t you worry about your future? Don’t you think you should do something to pass this critical time? If you say yes, then you must do something and not stay away from the fact and keep your mind away from the disaster. Face it and take action! You can do this, I believe you can!

Global economy is in hot water now and everybody is worry about their money and future. However, there are still a group of people thinking about whether they should start a business during this bad economy time. Some of them have been planning for so long to start a business but unfortunately the recession happens when they are ready to start one.

So the question is should you start a business during recession?

There are no right or wrong for the answer. According to my research, big companies such as Microsoft and Apple were founded during slow economy. Today, they are the big companies that are making billions of dollar. This has proven that economy and market doesn’t really have that much of impact on a business. But somehow people keep saying that it is good not to start a business during recession. So it really depend how you make your decision.

What Are the Factors that Determine the success for a Business?

Personally, I’m running a business too so I know the requirement to make a business succeed. Yes, economy and market might have some impact on business but they are not the major. For me, there are 5 factors that really determine how success your business is: