How to protect yourself from the financial crisis

1. Find out the reason for the collapse of the personal economy

Agree, any problem is solved by understanding the true causes of its occurrence. American billionaire Ray Dalio gave a very apt explanation of the financial crisis: a loan for useless things makes economic development cyclical, as a result, a decline in living standards is inevitable.

How does it look in practice? Consider as an example a fictional character named Fedya who works as a low-level manager in a large corporation.

Fedya has a certain labor productivity and spends all his money on the acquisition of material goods. Nevertheless, Fedya wants to increase his consumption and improve his standard of living. The natural way is to increase personal productivity (promotion, work overtime), but instead Fedya takes out a loan and buys a new car.

Fedya's consumption increased, but productivity and income remained the same. As a result, the character's personal economic system collapses, although he does not notice it. What is the reason? In the discrepancy between the size of consumption and production.

If Fedya's economy could be reflected graphically, then at the time of purchase there was a sharp upward jump, and then the chart fell even further down. Fedya lowered his standard of living for the loan repayment period.

Now imagine the millions of such characters who carelessly squander money. As a result, we see entire countries living on credit, bringing the situation to default.

2. Take action to recover

You are only safe if you can, having lost your fortune, not experience the additional humiliation of the fact that you now have to lead a modest life.

Nassim Nicholas Taleb American economist and stock trader

Once the reasons for the likely crisis in your budget have been identified, it's time to take decisive action. At the very least, try to bolster your economy by putting aside free funds once again, rather than spending them on something that is not too necessary.

Be prepared for a crisis in the country every 5-10 years. This is the cycle indicated by economists. Therefore, it is necessary to strictly observe budgetary discipline and live within your means, not allowing yourself to get into big debts.

Finally

Finally, there are three most important anti-crisis rules from Ray Dalio:

don't let debt grow faster than income;
don't let revenues grow faster than productivity;
do whatever you can to increase productivity, as this is the most important thing in the long run.