HOW TO MAKE MONEY WHEN THE ECONOMY IS DOWN
By: Nana Osae Addo-Dankwa (C.E.O) & Gifty Oye Adjei (Investment Analyst)
Economies of countries the world over, go through challenges every now and then. Typically fluctuating between periods of strong and weak growth, known as Economic Cycles. In simple terms, an economic cycle refers to the “ups” and “downs” in a given economy.
Each stage of an economic cycle is usually characterized by different sets of events. During an economic boom, there are high levels of economic growth. Employment levels are usually high and wages relatively rise as businesses engage more employees. Consumer confidence is strong and consumers have a more positive outlook on the state of the economy. This then causes an increase in demand as people spend more on goods and services. On the other hand, during a recession, there is rising unemployment, a sharp decline in business confidence and profits. This eventually impacts negatively on Gross Domestic Product (GDP) leading to high inflation, increased government borrowing and rising cost of living.
In 2011, Ghana was ranked the fastest growing economy in the world with a record high growth rate of 14% making us a Lower Middle Income Country. Unfortunately, based on the concept of economic cycles the same cannot be said today as Ghana is now suffering a reversal of fortunes. The economy has been troubled in recent years with its key economic indicators pointing downhill. As published in The State of the Ghanaian Economy Report, – Institute of Statistical, Social and Economic Research. The cedi lost 40% of its value against the dollar in the first eight months of 2014 to become the world’s worst performing currency. Inflation, which stood at 16.5% as at February 2015 was at a four year high, leading to rising public sector costs and increased government borrowing.
The declining nature of the Ghanaian economy has undoubtedly had a negative impact on Ghanaians, whose lives are being frustrated by the ever-increasing prices of goods and services. Higher costs of food, housing and utilities imply less disposable income for savings and investments. The business world also suffers during a down economy as falling sales figures consequently lead to lower revenue and squeezed profit margins. In addition, Ghanaians have had to contend with a serious energy crisis resulting in protracted power cuts, locally termed as “dumsor” which has greatly affected all aspect of the Ghanaian economy and our way of life.
All this notwithstanding, a down economy can also present great money-making opportunities to those who prepare and are willing to take a chance at being successful. Despite the fact that making money in a down economy is not as easy as it is in better financial times, the good news is that it can be done. For any individual, the best way to successfully make money in a down economy is to take control of your own personal finances by developing smart financial habits. Remember that our ultimate ability to influence the national or global economy is restricted, but each of us is able to exert control over our own personal finances so long as we are armed with the requisite knowledge and wisdom. Because since the last time I checked majority of us have still been drawing our salaries since the beginning of the year with the exception of some of our less fortunate brothers in the mining sector who have been laid off.
In order to survive and make money in a down economy, there are certain principles that one must follow. They range from living within your means, saving for the short to long-term and having a realistic plan in place to achieve your financial goals. Some of the key principles worth considering and practicing in these challenging times include:
1. Keeping Calm
During an economic downturn when everything seems to be going from bad to worse, it is very easy for people to get anxious. We worry about our future survival and this pushes people to make certain financial decisions that sometimes do them more harm than good. The key here is to remain calm even in the face of economic turmoil. During such periods, your primary target should be to meet your financial goals, so instead of panicking, try to remain focused and avoid making any rashed financial decisions without carefully thinking through them and getting a second opinion.
2. Setting up a Personal Monthly Budget
During an economic recess, one needs to be extra prudent when it comes to spending. In order to control your spending habits, it is best to set up and stick to a personal monthly budget. By setting up a budget, you will know exactly how much money you have and how much you can afford to spend. When you realize you are spending more than you earn, then you have to adjust your budget accordingly and cut out the things you can live without to save yourself some cash.
3. Open an Investment Account
Given the current state of the economy, it may seem scary to open an investment account. However, when it comes to investing, it is always best to begin investing as early as possible. This is because, the magic of compound interest makes regular small investments pay off huge returns in the long run. It is also very important to diversify your investment portfolio as different asset classes perform differently depending on market conditions and the economy. Therefore, choosing a broad range of asset allocations in various asset classes ensures that your returns will remain strong overall. For both old and new investors, it is an ideal time to invest in the *“MoniMac” product and also consider the purchase of some good stocks as most share prices on the Ghana Stock Exchange have taken a nosedive making them the ideal time to buy.
4. Add Value to Yourself
It is an established fact that a lot of people get laid off when there is a recession. Thus to safeguard your job and avoid the unfortunate and painful process of getting laid off, you need to add value to yourself and make yourself indispensable within your organization. You can do this by specializing and getting certified as an expert in your field of work. Also, going over and above your scope of responsibilities within your organization can help you keep your job guaranteed even when the going gets tough. Furthermore, if you have any ideas that can help your company cut costs and save money (such as using recycled paper, turning off lights and all electrical gadgets after the close of work,etc), suggest them to management and start working on them. Management usually tends to retain employees who can problem-solve and help them save money during tough times.
5. Get Creative & Innovative
Hard times call for creative solutions. A down economy is the perfect time to use your talents and skills to earn some extra income. It does not have to be a big business idea that requires a huge start-up capital you most likely do not have. If you enjoy things like baking, sewing, painting, playing a musical instrument, arranging flowers etc then you can engage in these activities as a side business to bring in some extra cash. For the corporate world, there is the need to strive for operational efficiencies in business by implementing some cost-cutting measures. For instance, working from home in cases of “dumsor” to save money on fuel and going out on the field to market your products when there is a less busy work schedule.
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6. Sell Off Items You Do Not Need
Take a good look around your home and you will notice a good number of things that you do not need or use anymore. If you do not use it, why not make a little money off it? Use e-commerce sites such as OLX and Tonaton.com to sell off these items for some extra cash. Moreover, selling old household items you are not using is a great way to clear out your storage space while making some cash at the same time!
In a nutshell, simply following these principles will not only help you save and earn some money during these challenging economic times but it will also help you make some extra money to weather the storm. Make sure you do not fall prey to all the negativity being projected about the state of the economy. Instead, stay focused on your goals and before you know it, you would have mastered the art of making money…even when the economy is down! Always remember that sometimes good things fall apart so better things can fall together.
*“MoniMac” is our flagship short-to-medium term Investment product, with very attractive returns far above Treasury bills. Please call for more details.
INVESTEYE CAPITAL PARTNERS LIMITED P.O. Box G.P. 13730. Accra .Ghana
37 Nii Sai Street, Mempeasem, East – Legon Tel: +233 (0) 540 121 262 Email:info@investeyecapital.com
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