Rory Brown, Lydian Founder, On How to Prepare for a Financial Crisis
Prior to the current Coronavirus crisis, world markets had enjoyed an unprecedented Bull Market for over a decade. However, the only thing that is really certain in the marketplace is that change is always coming. The key to successfully withstanding the next financial crisis is preparing adequately for bad times before they inevitably come back around. In this article, Rory Brown, Lydian founder discusses some of the basic steps for safeguarding against the fallout from cyclical financial crises.
Stay Liquid
In the event of an immediate crisis, access to cash can be the single most important protection for most people. Liquid assets are those that are made up of cash investments and can be turned back into cash quickly and inexpensively. Checking and savings accounts, money market accounts, and short-term certificates of deposit and governmental bond investments are all examples of relatively liquid assets. These types of accounts are also stable and safe. Only after you have sufficient liquid assets in place should you consider other investments that are either less liquid or riskier, or both. Depending on your circumstances, you should consider maintaining six months or more of your expected expenses in liquid assets that can be accessed in a time of immediate need.
Pay Down Debt
Credit card debt can become especially crippling to a budget in an economic crisis. Interest rates can increase quickly and create immense pressure to either forego other spending on essentials or default on existing debt payments. Create an aggressive plan to pay down and eliminate credit card balances. Look for better deals on card balances and budget carefully in order to eliminate debt as quickly as possible. In the event of a true economic crisis, freedom from existing debt can make the difference between existential struggle and the power to live comfortably until things stabilize.
Maintain Your Essential Assets
Think of the things you need to get by no matter what else happens. Maintaining your personal health, your car, and your home now can help avoid big problems if economic conditions turn bad. Spending the time and money now on routine maintenance and upkeep for your body, your home, and your transportation will be much simpler than dealing with catastrophic medical and repair bills when things are tight.
Build Your Human Capital
Consider the skills that you have or can develop that can be marketable in all sorts of economic conditions. Everyone can benefit from additional income sources, and what seems like an insignificant side income now can become essential to getting by during an economic crisis. Everything from producing or selling essential goods from home to freelancing can help you get through a layoff or period of lost primary income.
About Rory Brown
Rory Brown currently serves as a Managing Partner of Nicklaus Brown & Co. and was a co-founder of VirtualBank in 2000. VirtualBank began as an early adapter of technology creating platforms and interfaces for customers of financial institutions to access financial accounts and records through the internet. VirtualBank has grown to be a multibillion-dollar company, named “Best Online Bank” by Money Magazine. Rory Brown is also the co-founder of Lydian, which garnered him recognition by Ernst & Young as Financial Service Entrepreneur of the Year. Mr. Brown received a Master of Business Administration from the University of Charleston and is a Certified Public Accountant. He has focused on financial technology and investment management for over 30 years. In his spare time, Mr. Brown studies the history of the Lydians, the first people to use gold and silver coinage.
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