NFIB

The New Rules for Economic Survival
04/ 11/ 2002

by William J. Lynott

The economic uncertainty resulting from America's war on terrorism has shifted the primary objective for small business owners from how to invest to how to maintain current assets and avoid financial disaster. Given the unpredictable nature of today's economy, here are five defensive measures you can take now to keep your assets safe:

Don't take on excessive debt. Avoid any temptation to borrow against the equity in your business property or your home to provide operating cash. Home ownership, especially, offers a tempting but dangerous source of ready cash. Because your house would serve as collateral for a home equity loan, you could lose it if you found yourself unable to keep up with the loan payments in times of domestic turmoil.

Get adequate personal liability coverage. This should be in addition to your business liability insurance.

Keep your investments as defensive as possible. You'll be hearing about "new ways to make money in the market." Avoid them. Nervous investors are often seduced by investments they don't understand--an almost certain road to financial disaster.

Consider bankruptcy only as a last resort. Contrary to popular myth, bankruptcy is NOT an easy way out of financial trouble. A bankruptcy stays on your credit report for seven to 10 years, making it difficult to take out a loan, open a charge account or re-establish credit. If your debts become unmanageable, consider credit counseling. To find the nearest member agency, phone the National Foundation for Consumer Credit referral line at 1.800.388.2227 or go to www.nfcc.org.

Protect your identity. In the past few years, identity thieves have discovered new techniques for taking over your financial life. Be sure to guard your Social Security number, which is the key to accessing much of your information.

The basics of sound financial management probably won't change, even through our current crisis. In the meantime, you should avoid any drastic change in your financial affairs. Concentrate on maintaining a defensive position until the effects of recent events can be sorted out. In time, the new rules for maintaining your financial health over the long haul will emerge from the haze.

Lynott is the author of Money: How to Make the Most of What You've Got (iUniverse, $19.95).

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This article originally appeared in the February/March 2002 issue of MyBUSINESS Magazine.

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