Riding Out This Economy

[HCBailly]

I’m not sure if this is the right forum for this discussion, so if a moderator needs to move it, I understand.

From what I heard, one of the differences between success and failure in building wealth, is the ability to ride out the dips in the economy, stock market, or whatever your vehicle of choice is. What I would like to discuss are financial options for doing so. For those who don’t know me, I’m an aspiring wealthy-builder, though currently a self-employed owner of a part-time carpet cleaning business.

Obviously, the first choice would be to find ways of increasing income. I’ve already accomplished this with some specific target marketing towards my best, existing clients. Unfortunately, my efforts to gain brand new clients outside of referrals have been completely ineffective. I may consider a part-time job this winter, which is my slow season anyway. One of the few things my dad and I completely agree on is that I cannot force people to want to spend money on me. If it’s the middle of February, I could advertise $4.95/room and get nothing from the sale. In any case, I feel that I’m already maxing out my efforts to increase income.

I’m strongly concerned (not nearly panicking yet) that I may not be able to ride out this winter without other assistance. I believe that my next best option would be to take on more debt. One way of doing so would be to tap into my home equity. Even with the decline in the housing market, I got an offer for a $23K HELOC at a pretty good rate. That could last me a long time, even with the economy as bad as it is.

I could also look into other lines of credit (credit cards), as I have an excellent (750+) median credit score. If anyone knows where I could look for different offers at credit cards, please let me know. There was a website I saw a long time ago that allowed me to compare different credit card offers, but I don’t remember what it was called. Of course, with the credit market tightening up, I don’t know if this is really an option. Another concern of mine is that if I use this option and business declines even further, then I’m right back to where I am now, except with more debt. Then, I’m really in trouble.

My final and least favorable option would to implement means of drastically reducing expenses. One way of doing that would be selling my home. To be honest, I have a home that is bigger than I need. I only bought it because I got a really good deal (at the time) and it would have allowed me to start a family. My efforts to rent rooms out has failed. If I sell, then I highly doubt my ability to generate enough income to ever qualify for such a home again, so I understand that means giving up on my long-term dreams. Of course, if I don’t survive, then that doesn’t mean much.

The least favorable option of reducing expenses would be to declare bankruptcy on my business loan. It is basically killing my business. If I could pay off that loan, I believe that I could easily survive this economy, even with my current home. I’ve already re-negotiated the loan to reduce my payments, so I’m getting by for now. Unfortunately, my home equity isn’t nearly enough to pay off the business loan.

I’m well aware of the consequences of declaring bankruptcy, which is why I want to avoid it at all costs. Out of curiosity, how does anyone survive a bankruptcy after losing their income? You can’t get a job, you can’t get a home. What do people do? Surprisingly, I’m doing the least bad, financially, in my group of family and friends, and some of them who have had a foreclosure or bankruptcy still can’t recover.

In any case, all of this is dependent on consumer spending increasing some day, due to the nature of my business. From the number I’ve seen (let’s avoid politics here), the economy seems to be stabilizing very very slowly. Although, I would imagine that’s partially due to recoil where people (like me) were operating on inventory for as long as possible, but eventually were forced to start spending again.

One problem I heard is that even if credit markets free up and companies start hiring again, nothing will compensate for the massive evaporation of wealth in the near future, which is why people are saving now. For too long, wealth was based on invisible equity in homes and the stock market, and now it’s gone. I can’t imagine that changing in the near future, so what can I hope for?

In any case, life is okay over here, temporarily, at least.

 

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