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economy: financial crisis

What is a financial Crisis?

Investiopia has defined the financial crisis as: “A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. Financial crises involve the cracking or breaking the  established order by the capitalist market.”

Futhermore the ABC definition has mention How a country can finish in a financial crisis:”These phenomenon may arise when different financial systems act in a way that make bonuses, stocks and the financial elements of the companies or banking institutions lose their value and entering in crisis. The most difficult elements of the financial crisis are not the causes the consequences are usually very difficult to control and contain. Definitely the consequences are the most difficult to control.”

“Moreover, Financial crises are always very hard for society as consequences arise such as: unemployment, inflation, the rise in interest and values ​​of mortgage loans, the general recession, misery and poverty. These consequences can be seen in the short and long term such as: A personal financial crisis.Some of the most serious crises of capitalism, as was the 1929 crisis, generate many complications not only economically but also at the level of social reorganization.”

Some of you would be wandering: What is a Personal Financial Crisis?

As Amisi mentioned having a personal Financial crisis is: “having a lot of credit debts, medical debts, etc… Having the inability to return the money you have being lent by others”

TYPES OF FINANCIAL CRISIS.

According to the International Monetary Fund (1998) “we can distinguish three types of financial crises:

Currency crises: The experienced by a country when it devalued or depreciated exchange value of its currency as a result of a “speculative attack”. Similarly crises is considered changed when a government to defend the exchange rate is forced to make a use of large amounts of international reserves or significantly raise interest rates.

Banking crisis: Occurs when massive withdrawals of bank deposits occur weakened the confidence of the people, leading, in some cases, funding from the state in order to avoid further consequences. Its generalization becomes a banking crisis.

Debt crisis: It is associated with the inability to service debt owed abroad, this being public or private.”

To conclude I would like to finish this post by giving you some Tips which I have searched them in the internet of how everyone should cope with a Financial crisis and a Personal crisis:

As  has mentioned “There are 5 different ways of dealing with a financial crisis, which are:

1- “Stay under control”
“Now is no time to panic.  Certainly, these are serious conditions, but freaking out and running around like a chicken without its head will do absolutely no good.  When faced with adversity, you must remain in complete control.  This is why it is crucial to remain calm.  Only under such circumstances can you make sound decisions and rationalize what is happening with logic.  Keep in mind that this crisis is affecting all of us.  We are all in the same boat, so there is no need to let things get out of hands.  We do not have much control over what happens in these financial markets, but we do have full control over ourselves, so this is what we should focus on controlling.  Great leadership is conveyed through calm and peace during difficult times, and what we need right now from everyone around us is good leadership.”

2- “Keep informed”
“It is extremely important to remain in the loop to know what is actually happening in these troubled markets.  If there was ever one topic that people definitely need to pay attention to, it is this one.  The more knowledgeable you are about this, the better decisions you can make.  I highly recommend that you get your news and information from various sources, as well as discussing it with your friends.  We need to share perspectives and opinions so that we can carve out the best possible plan for ourselves.”

3- “Reassess your financial situation”

“With the information that you have gathered, you need to start asking yourself some important questions.  Is my job or business affected by this?, What about your investments?  Do you have a lot invested in companies that are on the brink of a financial collapse?  This is why you need to stay informed, so that you can perhaps rearrange your investments into a more appropriate solution.”

4- “Have a back up plan”
“I am the type of person that always has a plan B, C, or D.  This has helped me achieve a great amount of success in my life.  The worst thing that can happen is to be slapped with a surprise event that forces us to change our path, but not knowing which path to now take.  This is why you absolutely need a back up plan.  What will you do if you lose your job?  You need an answer to this in case it happens.  What happens if your mortgage payments inflate significantly?  How do you react if the value of your investment portfolio is dwindling down at an alarming rate?  Having such a plan in place will not only save yourself many sleepless nights, but it can help save you some valuable time, energy, and probably money, simply by having had a rapid, yet smart answer to help you guide you into a new direction.”

5- “Change your spending habits”
“When there comes a time of recession or depression, you need to become extremely careful with money.  Spending on unnecessary items & keeping expensive habits will only put you in the hole deeper if you end up losing your job or your interest rates go up.  You have to be smart about how to go about this.  Being preemptive in case things get worse can make a huge difference in your life.  Instead of taking an extravagant vacation, perhaps a more economical one is the best way to go at this time.  Maybe go a little easier with the Christmas gifts this year.  Even if the oil prices are currently dropping, perhaps you can keep your driving habits that you changed to save you money when the prices were through the roof.  Anything that can help keep more money in your pocket is a good thing during these challenging times.  Now is not the time to rack up more debts, so living within your means is key to getting yourself through this crisis.While it is a serious situation, it is not necessary to let this crisis take over your entire life.  Keep a positive attitude about this, continue to enjoy your life, and make plans for your future.  We will certainly get through this.  We will ride this wave and there will be much easier days ahead.  Just be ready.  Prepare yourself just in case.  It’s like wearing a seatbelt in your car.  You do not want nor expect to be in an accident, but just in case you are, at least you are protected.  Have this same attitude with your finances.”

As Don Bradley has said “A very patient friend of mine is going through a crisis of disruption of life as are many people these days, as the world’s economies continue to slide into the abyss. This is something I know a little about, because this has happened to me at least a dozen times, as I’ve watched everything I knew, built, planned for, and hoped for, dissolve right under my feet, regardless of any effort made to change its outcome. You can discern this occurrence in your life by the following factors.””

“Don Bradley has given us some tips to deal with a Personal Financial Crisis
1. “Nothing you do seems to make a difference. In fact, just the opposite occurs.”

2. “People you trust and have made endless sacrifices for, reveal to you how little you really mean to them. Instead, they take advantage of your situation, knowing you are at the end of your rope.”

3. “200% efforts to make changes in any direction are met by a thousand and one obstacles, all of them seemingly working in concert to make matters worse.”

4. “Opportunities appear and then vanish very quickly, before you can realize  them.”

5. “Friends and friendships become visible for what they really are, or have been, all along.”

6. “Everything and every goal you’ve striven for is erased from your life, one after another, with perfect regularity.”

7. “You find yourself alone, watching others move forward as your life comes to a halt on every level: financial, work, home, everything.”

8. “Wishing does no good.”

9. “Acting does no good.”

10. “You can point to a day on the calendar–very near at hand–when you will be destitute, ruined, and will have nothing, except that which you truly own free and clear and without any encumbrances. Even those things are in danger of loss, if they have no place to reside.””

References:

Invetopedia(S.F.) Financial crisis in Investopedia. Retrieved January 16th, 2014 from:http://www.investopedia.com/terms/f/financial-crisis.asp

By Definicion abc (S.F.) Definicion de crisis financiera in deficionabc. Retrieved January 16th, 2014 from : http://www.definicionabc.com/economia/crisis-financiera.php

By amisi (March 9, 2012) what is having a personal financial crisis in City data. Retrieved february 4th, 2014 from :http://www.city-data.com/forum/personal-finance/1680241-personal-financial-crisis.html

Que aprendemos hoy (S.f.) Crisis Financiera (I): concepto y tipos in Que aprendemos hoy. Retrieved January 16th, 2014 from: http://queaprendemoshoy.com/crisis-financiera-y-tipos-de-crisis/)

(November 2008) 5 important tips for coping with the financial crisis in I need motivation. Retrieved February 4th, 2014 from:http://www.ineedmotivation.com/blog/2008/11/5-important-tips-for-coping-with-the-financial-crisis/

Don Bradley (March 25, 2010) Coping with a personal financial crisis in Henry Makow.Retrieved February 4th, 2014 from:http://www.henrymakow.com/coping_with_crisis.html

 

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