Recession is a normal economic cycle that happens from time to time. In my article, Understand Recession in Simple Language, I said that the main reason that caused recession is the fear of people. Once something happens on the market and makes people worry about their financial future, they will stop spending money and hence activate the economic chain effects until recession happens.

What has actually happened that make people worry?

This is the issue that we are going to discuss below…

Reasons that caused the great American Slow Down

You will see and hear the phrase recession a lot from the newspaper or other broadcasting media in America. This is because there are a few economists predicted or even claimed that America is already in recession. This has been a hotly debated issue among the economists for months.   

Recession is a word that makes a lot of people worry, isn’t it? However, no one can really say that America is in recession, so are we. In fact, we should not care about how others have said about it. We should learn how we can “see” it through our own eye and analysis. Then we should learn how to survive financially in the recession period. Recession-proof on our personal finance is the most important job that we must do right now, no matter recession happens or not. But before we do so, we must understand some basic about recession.

What is Recession?

Recession is a period when nation’s economy is slowing down. Conventionally, we only can declare we are in recession if the slowdown has continued up to 6 months. It is just a normal business cycle and natural phenomena in economy. Every thing that hits the highest point must go down before it can hit the new level. If you read the stock market chart, you will understand this theory very well.

I always heard the story that people keep complaining that they don’t have enough money to spend or don’t have any money left at the end of the month. They are living paycheck to paycheck. But to me they are considered the lucky one because many people are living credit card to credit card. Yes, they are having negative cash flow and have to use their debt to survive.

Actually in most cases, there is something wrong with their cash flow management. There must be something happening in their way to spend money before that caused this cash flow problem. The theory of the law of cause and effect applies here. If you want to know the reasons, you can refer to my article Reasons Why People Are in Debt.

Mind Your Own Cash Flow  

If you read the book rich dad and poor dad before, you will know that one of the lessons that you need to learn is Mind Your Own Business. It is not about starting a business and taking care of it. In fact, the “business” here is your cash flow, your money and your future. Those are the important things for your life.

I always believe that if you want to success in your life, the first thing you must win is in your cash flow game. According to Anthony Robbins, there are 5 things we master and keep them in balance if we want to success. They are:

1. Emotion Mastery – Master the way we feel
2. Physical Mastery – Master the health of our body
3. Relationship Mastery – Master our social life
4. Financial Mastery – Master our personal finance or money
5. Time Mastery – Master the time management.

As you can see, money is part of our success and it can affect other mastery too. Each of them is inter-related. I believe you have heard a lot of stories about how people ruin their relationship because of money or even loss control their emotion due to the debts.

So the conclusion here is Mind Your Own Cash Flow (Business) is the first step to success.

Lately, I managed to get an audio course for a popular book; the Millionaire Next Door. This is a popular financial book. So I quickly spent my first week listening to the tape and learn from it.

The Millionaire next Door is a good learning material about wealth and wealthy people. The most amazing part of this audio course is it provides all kind of statistic and facts to discuss the spending habits, money mindsets and money behavior of the wealthy people. The course also shows us that most of the wealthy people looked ordinary and normal. However, the people who owned fancy car and biggest house, in reality are broke! They just look like a wealthy people and they are also the one who suffers from money problems.

Currently I almost finished 60% of the audio course and I get a big message that we should concentrate on our wealth instead of how much we make and earn or how many fancy materials we have. There are a lot of benefits becoming a wealthy people. So I quickly did some research on building wealth and I found a new terms for my mind – High Net worth Individual (HNWI).

What is High Net worth Individuals?

We all heard about millionaires, billionaires, rich people and their exotic lifestyles. However, recently, the term “High Net worth Individuals” is being used frequently to describe a person whose net worth is more than $1 million. This figure does not include the first piece of real estate owned by individual.

Needless to say, HNWIs know something about making money, managing money and growing their wealth. In fact, they accumulate their first million by sticking to some simple rules and formula. If you do the same thing, you also can become a High Net worth individual.

Determining your net worth is the first step in most financial planning processes. If you want to have a better financial future, then you must learn how to make a good financial plan for your future. In order to do so, you must learn how to determine your net worth first. By knowing your net worth, you can understand how well you have achieved in your personal finance and hence set some financial goals to improve. You have to find the right treatment to cure it by knowing the illnesses in your body.

Calculate your Net worth

Theoretically, it is very easy to calculating your net worth. The process consists of three steps:

1. List your assets with values
2. List your liabilities with values
3. Subtracts your liabilities from assets and the result is your net worth.

So the Formula is: Assets – Liabilities = Net Worth