1. Do NOT purchase gift cards
Not a lot needs to be written about this one, with the list of bankrupt chains growing every day, you’d have to like playing Russian roulette to buy any type of gift cards right now.
2. Do NOT prepay for insurance
The insurance industry is under severe strain and while a few people choose to prepay their insurance premiums 6 months or 12 months at a time, if you can pay monthly it may be a better option despite the nominal $2 to $3 fee for doing so because this will help preserve your cash flow and give you some options if your insurance company goes bankrupt.
3. Do NOT prepay for retail products
Layaway services are all the rage now that people can’t buy on credit but what happens if you’ve been paying layaway fees and depositing money to a retailer and the retailer goes bankrupt? Do you think you’ll get your money back?
4. Do NOT prepay for utilities (a.k.a balanced billing)
Throughout the United States, most utilities offer the option of prepaying and/or spreading your utility payments throughout a 12 month period evenly. While it sounds like a great idea, during a recession and a deflationary spiral, the big winner is the utility and the big loser is you. The prices of natural gas, heating oil, propane and electricity have dropped dramatically over the past few months and will likely continue to drop so why give more money to your utility company now?
5. Do NOT prepay for services
Whether your prepay your lawn service, maid service, pool service or anyone else, it’s time to rethink this strategy. It’s not uncommon for small businesses to struggle, cut back, reduce service or go bankrupt during tough economic times and there’s no point in losing money to these service providers if you don’t have to right now.
6. Do NOT commit to long term leases, contracts or agreements
The job losses keep mounting weekly and we’re not at the tail end of a recession we’re at the BEGINNING! There is a high probability that you may lose your job, be asked to take a pay cut, forgo a bonus or have a reduction of business at your employer that may result in some adverse consequences (e.g. pay more for health insurance or lose health insurance coverage).
7. Do NOT seek new employment
If you can postpone looking for a new job, right now isn’t the time to be job hopping. I can’t tell you how big the list is growing of professionals that I’ve known over the years that are now calling up asking for leads, interviews or help looking for a new job.
8. Do NOT incur any new debt
I love debt during inflationary times because the value of the debt gets inflated away but during a deflationary spiral, any new kind of debt increases the pain of servicing payments on existing debt and refinancing debt becomes much more difficult.
9. Do NOT make any large purchases (e.g. home, car)
There is a reason autos have $13,000 off MSRP and that’s because no one is buying them. Homes also have incentives as large as 50k to 100k “off” of original price. During deflationary periods, the intrinsic value of anything and everything goes out the window. A piece of property is only worth what someone is willing to pay for it, all markets become local.
10. Do NOT blame anyone for your situation
Let’s face it, everyone is looking for scapegoats to blame for the economic mess but the reality is that economic cycles, booms & busts just happen and once we’re beyond this one they will happen again.