Lessons From A Recession

As we come to a close on what has been a treacherous and punishing economic cycle, it is important that we all learn something from this economic cycle.

A recession is a cleansing process, and a painful one. But from the ugly, opportunities to prosper will be abundant again.

But first, in order to prosper, we must take a few lessons forward with us to prevent a repeat of history. The lessons are the same for business and individual success.

Lesson number one - Keep your balance sheet clean. Have little to no debt and keep an ample amount of cash for emergencies. Cash gives you the flexibility to ride things out and invest timely when things start to recover.

Lesson number two - Keep your credit clean. Part of this can be accomplished by having enough cash to ride out the economic downturns, but the other part is discipline (don't be too greedy). Keep debt manageable and borrow conservatively. Debt is burdensome and will strangle a company or individual quickly. Planning for debt repayment should be a plan based on worse case scenario. The 2008 global recession is a worse case scenario. Always plan for the worse.

When greed takes center stage it reminds us all to be careful who you listen to. From the Madoff debacle to the demise of companies like Lehman Brothers, trust is at a premium. So what is the third valuable lesson? Do your homework. Gain as much knowledge as possible and don't get into things you don't understand. Concentrate on what you know best. Blind faith is a bad strategy.

Finally, things can always be worse. Be prepared for the worst. Strive to be in the best financial position possible at all times. When times get good, take calculated risks, but realize the economy can change for the worst in hurry. An "all in" attitude is a gamble and often a move of desperation or greed. Avoid the urge to get greedy.

Here's hoping that you see the recent events as a learning experience and an opportunity to recover. Best of luck.