What is the tax implication for stock traders? The answer to that question depends on how you are trading. Most people don’t think about this part of the trading game, instead they just open a brokerage account and start placing trades. However the tax consequences can be very substantial, both if you make a lot of money or loose a lot of money.

A lot of people get a mind block when it comes to taxes, but most things are understandable with a little reading. I have written a blog on Hub Pages that outlines the different way a trader can trade and the tax implications of each. Click the link below and check it out:

Tax Planning for Stock Traders

Tax preparation can be a hassle, but it doesn’t have to.  If you properly plan, keep track of expenses all year long, and know how you are going to have your taxes prepare it can be a painless process.

Should you prepare your own taxes or should you have someone prepare them for you?  Many people just look at the cost of preparation without considering the tax consequences that could arise.

I wrote an article on Hub Pages that outlines the pros and cons of tax preparation and will give you things to consider as you make this decision.  You can read this by going to:  href=”http://hubpages.com/hub/Tax-Preparation-Self-or-Paid-Preparers”>Paid or Self Tax Preparation

Just because you can buy Turbo Tax for $49.99 and the local tax preparer is going to charge you $185 doesn’t mean that is the cheapest way to go. The difference of $135 is easily saved in one line of a tax form that the self preparer does not understand. On the other hand, if you can file a 1040EZ why pay someone to prepare it for you? If you can simply read you can complete it in about 15 minutes. Make informed decision which ever way you go. Taxes cost each of us a lot of money.

It’s something everyone needs and it is something every one wants more of and that is cash flow. In today’s economically difficult times finding cash flow strategies is a necessity of life. In fact, I personally think that having multiple stream of cash flow is much better then having one.

When it comes to household cash flow most rely upon their job as their only source of cash flow. Then something happens and voila income is gone. If a person has multiple streams income then if something happens to one stream we’ve only lost a portion of our cash flow instead of all of it. It is much easier to recover in this type of a scenario.

I have recently written two Hubs on Hubpages regarding cash flow strategies. Neither take very much money to create and neither are very complicated to learn. I will provide the links below:

Creating Cashflow with Naked Puts

Cash Flow Strategies that Safely Earn 20% a Year

Are you willing to invest a little money into yourself?  I highly recommend tax materials by Sandy Botkin.  He is a tax authority and his information can save you hundreds if not thousands of dollars in taxes.  Rising Glory readers can save 10% off their purchase price by using Risingglory as their coupon code.

For those who like to trade paper (stocks, equities, etc), Options are a marvelous beast. However, if not used right they can eat you up due to the “time factor,” more accurately referred to as Theta in the Greeks.

When I first started trading I really like Options and I basically bought Calls and Puts based on whether I thought the underlying stock was going to rise in price or go down in price. It was a lot cheaper approach where I new what my maximum risk would be. As a novice I would base my decision on the price of the Option knowing that once I bought the put or the call the maximum loss that I could incur would be the premium that I paid. In addition to this novice strategy I NEVER sold an option. Why would someone assume a theoretical unlimited risk to make $50, $75, or even $150? It made absolutely no sense to me at all.

After losing a lot of money I decided to get educated. This “Theta” that I mentioned before is very critical to the Option trader. When time is working for you instead of against you interesting things happen. In this blog I am going to to talk about three strategies that I like where time works in your favor instead of against you and how you can use the Delta to help you manage your trade. I would encourage you to continue reading that what I am going to talk about is not only easy, but is also very profitable with controlled risk.

Options are what is known as a derivative. It is a contract that has a value placed on it and that value is determined by several factors. These factors include time until expiration, implied volatility and the strike price in relation to the underlying stock price. Don’t worry, I am not going to get all technical here, just follow the basic concept. These factors determine what the price or value of the option is.

I am going to focus mainly on time in this blog. The more time there is left in the Option the more time value is in the Option. This time value erodes as the days tick away. This can be good or bad all depending on what side of the Option you are on. For those who sell Options, every day that ticks away is more money in their pocket from this time value. For those who bought the Options the stock needs to be moving in the right direction in order for the value of the option to increase beyond the time decay that is taking place.

By learning how to use the Option Greeks it is very easy to enhance your understanding of the risk and characteristics of the options trade you currently hold. After reading this blog I am confident you will look at your Options in a different manner. Let me get into the three strategies that I would like to talk about.

The Naked Put Strategy

Sounds horribly risky doesn’t it. I mean, who likes being naked? I am sure that you have heard that in the Naked Put you have a theoretically unlimited amount of risk while having limited profit potential. In one sense of the explanation this is true because you are selling (shorting) a Put Option. Let’s say that we are looking at stock XYZ and the current price of this stock is $25.00. You think that this stock has great potential (going up that is) and by your analysis find that at $23.50 there is strong support. Therefore, as this stock goes through the gyrations of the day you don’t think it will ever get below this $23.50 support area as it bounces upward into new highs. Therefore, you decide to sell a $20.00. Let’s just say that the premium on this Put is .85 cents (this would really be $85.00 because it is .85 cents a share and the Option represents 100 shares).

When you sell the $20 Put you will immediately collect the premium, which is your maximum potential gain. Now comes the time factor. As long as the stock stays above this $20.00 strike price you are gaining money due to the decay in time value. Because this Put was out of the money (OTM) the full .85 cents was all time value.

What is your risk in this trade. Well, theoretically it would be $20 minus the .85 cents you collected or $19.15 times 100. In real dollars this is a maximum loss potential of $1,915. Realize though, that XYZ would basically have to go out of business for you to realize a maximum loss.

Right now you are probably thinking, “This is nuts! Who in the world wants this trade?” Well the answer to that is, “those who like to make money.” This is actually a VERY safe trade when you manage it correctly. And guess what? It is VERY easy to manage when you use the Delta. You really don’t even need to understand Delta, all you need to do is follow a couple simple rules.

Delta helps you understand the risk that you are taking on in the Naked Put strategy, which is how we are going to make this a VERY safe trade. You want to consider this trade only on stocks that you believe will either increase in price or continue to trade in a sideways pattern. It is also what is considered a negative volatility trade. In other words, if you find a stock where the Implied Volatility (IV) is high this will also cause the deterioration of the premium to increase. You can check the IV on any stock for free at www.ivolatility.com.

Where people typically miss out on this trade is because they only look at the risk and reward without considering the probability of success. This is where the Delta comes into play. Reward and risk measured alone won’t give you all of the information you need to determine the strength of the trade that you are looking at. You also need to factor into your decision this probability of success I just mentioned.

Consider for a moment an Option that has a .15 delta. This particular option is presumed to have an 85% probability to never go into the money. That’s called profit to the Naked Put trader. In other words there is assumed an 85% chance of success. Most of the risk in a Naked Put is realized if the stock moves into the money. This means that the price of the stock drops below your strike price. By using low delta options you can give yourself a lot of breathing room when taking these trades. Options expire on the third Friday of each month. In the last 30 days of an Option the time value decays the fastest. Therefore, I like to place my Naked Put strategies during the third week of the month. For example, if it is the third week of January I will be looking to put my Naked Put strategies together that have a February expiration. For me, the third Friday of the month is Payday! This is when my strategies expire worthless and I have access to the full premium collected. It is also when I place my next set of Naked Puts.

This is how I like to construct this type of trade. First I find a stock that I believe will be trending up or at least I don’t think that it will drop below a specific price based on my technical analysis. I then go to my brokerage account and look up the Options for the next month and go down the Delta column until I find Delta’s that are between the .10 and .25 range. There is typically one or two that fall between these Delta numbers. Remember, it is presumed that these Options will have a 75 – 90% chance of expiring worthless.

Once I identify these low Delta Options I then look at the premium that could be collected should I sell it. Sometimes the premiums are real low and not worth selling. I like to sell options at .75 cents or higher. If I sell 10 Options at .75 cents that equates to a $750 maximum profit (.75 cents X 100 Shares X 10 Contracts). Your account size will determine how many of these you can sell.

The second thing I do is I spread my money around to several different trades. You may be the ultimate stock picker, but I found that I am wrong on occasion. Therefore, sell Options on several stocks. The ultimate success of a trader is the ability to limit risk. If you sell Naked Puts on 10 different stocks you may be right on 7 of the 10. The losses on the 3 won’t ruin your month especially if you follow my exit rules defined below.

Managing the Trade

This trade makes money through decay. To achieve maximum profit the Option you sold would expire on the third Friday of the month worthless. In other words, you are making money on the time decay. So how do you manage the trade? Not every stock you pick will go the direction you think it will, therefore you want to know how to get out of the trade.

In our selection process we selected Options that had a Delta between .10 and .25. Should the Delta ever rise to .40 then simply exit the trade. It’s that easy. The hard part of this is that you will want to look at the price of the stock compared to your strike price. You will typically see that your Option is still out of the money and you will be tempted to hang onto it because you know that the stock is going to turn around and go the direction you originally thought it would. DON’T DO THAT! If the Delta gets to .40 then just sell it and take the small loss.

If you follow these simple rules you will find that you can make consistent profits in the market with time working for you. I told you in the beginning of this post that I was going to show you three strategies. The next two are just variations of the one I just explained. If you understand the Naked Put you will easily grasp the next two which are called the Bull Put Spread and the Bear Credit Spread.

Bull Put Spread

The Bull Put Spread is the exact same thing as the Naked Put except you are going to add an additional Option to limit your risk. First off, let me explain the name of this strategy. The word “Bull” refers to the direction you think the stock will trend. You are bullish or believe the price of the stock will increase. The word “Put” means that you are going to use Put Options to structure this trace. At this point, this is the exact same thing as the Naked Put. A trade where you are using Puts on a stock you think will increase. The word “Spread” means that you are going to use more than one option to structure the trade. This is the difference between this trade and the Naked Put.

I will use the same numbers as I used above on XYZ stock. We were selling the 20 strike price, but let’s say that instead of making the full .85 cent premium that we are will to take a little less in order to limit our risk. Therefore, we are going to “buy” at 15 strike price Put. If we are wrong on the direction of the stock and it starts falling (causing our short Put to loose money) then we now have a 15 strike price Put that will make money as the stock falls. We have to “pay” the premium on this Put so let’s say that the premium on it is .20 cents. What this does is limits our profit to .65 cents (.85 cents collected – .20 paid). But it also limited our maximum risk to $4.35 ($435). This would be the difference between the strike prices less the .65 cent credit we received.

You will want to structure this trade exactly like you structured the Naked Put. Use the same Delta numbers on the Option you are selling (don’t worry about the Delta on the Option you are buying) and plan to exit the trade if the Delta ever gets to .40. The one thing you want to make sure of in this is that the net premium is worth the trade. I would not structure this trade if the net premium was under .50 cents and even might not do it at that. Most of my trades still follow the .75 cent minimum rule unless it looks like a bullet proof trade.

Bear Call Strategy:

The third trade idea is called a Bear Call Spread. It is exactly the same thing as the Bull Put only in reverse. The reason this trade is so cool is because you can make money when the market is going up and when the market is going down. This particular strategy allows you to profit when you think a stock will drop in price.

Let’s look at the name again. The word “bear” means that you are bearish on this stock. You believe the stock you are looking at will not go any high, but will stagnate into a sideways moving channel or start dropping. The word “call” means that you are going to use Call Options. Call options make money when the price is going up. We are going to put time on our side again and structure this trade so that the value of the options will decay with time. Our maximum profit will be achieved if the Options expire worthless. Then, the same as above, “spread” means that we are going to use more than one Option.

To structure this trade follow the same basic rules. The Delta rules for entry and exit are the same and the premium rules are the same. When looking at the Delta’s make sure that you are on the Call side of the option chain. The only difference is that you are going to identify stocks that you think will drop in value.

Side notes that apply to all three strategies:

All three strategies are considered credit trades. That means you receive your money up front because you are collecting the premium on the short Option. For the spreads the Option you are buying will always be further out of the money then the option you are selling. This makes the Option premium less. When you are placing your trade you have done this incorrectly if you have to “pay” or have a “debit” cost.

On the spreads always enter the spread with the same expiration months and also enter the position as one trade. In other words, don’t place two orders to enter the spread. On your brokers order sheet you want to place the sell side of the trade and the buy side of the trade as one order.

Profitable trades do not have to be held to expiration. In fact, yesterday (the day before I wrote this blog) I had a position that made a very strong move in my favor the same day that I placed the trade. This strong move put me in a position to collect over 50% of my total profit in the same day I placed the trade. I went ahead and exited the position taking my profits. Maximum profits are achieved when the Options expire worthless, but if you’ve made 50-70% of your maximum profit you may want to close the trade and look for another opportunity.

If you have never allowed an Option to expire worthless don’t sweat it. You don’t have to do anything, it will just disappear out of your account. However, you should pay attention to the last couple of days before expiration as these days can be volatile. If your stock ATR (Average True Range) is within the strike price you might not want to chance it going into the money and being exercised on your position. Just close the trade out prior to expiration.

When closing a spread trade you have two options. You can close it as a spread, meaning that you will close both positions and be totally out of the trade. The other option you may want to consider is to just close the short side of the trade. This is especially true if your Delta has hit .40 and you are leaving the trade early. In this instance you may want to leave the Option purchased open. If the stock continues to go against your original thoughts this second Option will make money as the Option continues in that direction.

These strategies can be very profitable and very safe if structured correctly. Have fun and make some money.

A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment in the last four weeks is considered to be a discouraged worker.

Discouraged workers have usually given up on searching for a job because they found no suitable employment options and/or were met with lack of success when applying. These types of workers are not counted in the U3 unemployment figures as published by the government.  Therefore, when you hear that unemployment is at 10.4% that number only reflects those people who are not discouraged and are still seeking employment.

The U6 figures include those who have become discouraged and is a more accurate number when it comes to reflecting the work status in America.  This number recently topped 17%.  So what is going to happen down the road?

My prediction for 2010 is that the U3 will top 15%, however this number is highly manipulated so let me focus on the U6 which I believe will exceed 20% before the end of the year.

Okay how about a predicition for 2010?   I’ve been saying what this guy is saying for about 5 months now (only he does it more intelligently).  My theory as to why this was happened all stemmed around the health care package. Watch the video then I will explain my 2010 prediction in comments below.

My prediction speaks to how you may consider to position yourself for this year so that you are not hurt financially. Very simply, as one of President O’s men has said, “don’t ever let a crisis go to waste.” Position yourself!

Analysis:

The Presidents Health Care package was (hopefully dead now) a very expensive, massive move to socialized medicine and a shift in the America way. No matter which way this bill ended up going he had to know that it was going to be a big fight due to the change in how we do things.

At the same time he was trying to get this massive takeover through, the fundamentals of our economy were getting worse, just look at the “price” if you will or “real money” factors of the economy…employment, GDP, housing/foreclosures, dollar value, etc. All of this is tanking. However, most people are not economically educated and they look at the stock market to judge the condition of the economy.

According to Biderman HUGE amounts of money have been propping up the market through the overnight commodities trading (ever wonder where the non-spent stimulus money went?)   As he points out, only the Federal Reserve (which is neither Federal or a Reserve) has the ability to do this.

Why? In my opinion if the market tanked (which it should have being as overpriced as it is) those who supported health care reform may back out, if not just temporarily, because of the cost on the economy. This in itself would have killed President Obama’s ability to get his pet project through.

With the recent Massachusetts vote and the super majority changed the road to passage is much more difficult, but President Obama in his State of the Union address has not given up.

Now for my prediction. I predict that the propping up the market is going to stop and a new strategy will emerge. Before, it was “let’s artificially keep the economy looking better than it is so people think we can do this.”  I believe that the strategy will now be, “let’s allow the economy to tank so that it will become so difficult that people will have to have government health care.”

So what is my prediction?   This year is going to be very difficult for most from a financial sense. Mr. Bernake’s plan is to flood the economy with money in order to avoid deflation, but will cause major inflation. U3 unemployment will increase to over 15% before the end of the year and the S&P will fall below 900 (maybe much worse) by the end of the year.

Predictions:

1. The value in the dollar through inflation and world abandonment will tank. Buy gold or silver. Gold should be testing the $1,000 an ounce support levels over the next week or so and Silver is in the $16 level…both excellent places to buy.

I prefer silver based on the scarcity of it (lowest above ground levels ever) and because per ounce it is more affordable to the average person.

2. Profit from the falling market.  You can do this through short positions, but since many don’t understand how to short the market one can buy shares in the ETF “SH” which is the Short S&P Fund. It is an inverse fund so in essence if you buy shares you will profit from the decline in the S&P. Buying on pullbacks would be a good strategy while keeping a stop loss order below prior support should keep you in the game.

You can also buy shares in the “PSQ” which is an ETF fund that is short the QQQQ. Again an inverse fund that goes up when the market goes down. The Q’s reflect what is happening in the Nasdaq. The Nasdaq led the rise over the past several months and therefore has more to lose.

Remember, this is my opinion and as I’ve said many times, “Opinions are like arm pits. Everyone has a couple and they typically stink.” My main point is not for people to necessarily do what I say, but to not live blindly. Pay attention to what is going on. Your whole life may be changed (good or bad) in the next few months. We’ll see how my predictions play out by the end of the year.

I am 47 years old at the time of this writing.  Even though I would be considered “middle aged” things have changed dramatically in my lifetime.  Wow!  What am I talking about?  Things have changed dramatically just in the last few years.

I remember coming out of school and the concept was to get a good job so you can prosper.  Looking back I can see that was bad advice.  While there is nothing wrong with a good job…in fact, everyone should have one.  The reality is that you are not going to get ahead with just a job.  With record high unemployment many don’t even have that.

The answer is not “how do I find a job,” but rather “how do I create cash flow?”  Recently a politician made the statement that was in the news a lot.  He said, “Never let a good crisis go to waste.”  Well, there is much truth in that.  Warren Buffett once said that a person should be greedy when people are fearful and should be fearful when people get greedy.  Right now the populace as a whole is fearful.  What does that tell us?  There are great opportunities right now.

Now seems to be a great time to find out who to accumulate real estate.  Right now there are great opportunities in the stock market (not just because it has gone up in recent months).  When things get hectic there are many ways to profit.  However, if your mindset is that you need a 40 a week job you will miss all the opportunities that are around you.  If you focus on the fact that you don’t have money you are going to miss all the opportunities to acquire money.  Now is the time that millionaires are made, but they are “made” not “won.”

Don’t miss out on your piece of the pie.  Poverty is all around us with the vast majority hovering around the lower end of the economic scale.  The top is where all the room is at.  Start figuring out how you can change your location because now is the time!

Most know that many don’t keep their New Year’s Resolutions, yet many take the time each year and set new ones.  On the other side of the equation very few people set goals, yet properly set goals keep a person disciplined and focused.

A resolution will typically look something like this:

“I’m going to loose 25 pounds in 2010″

However, a goal will typically look something like this:

Loose 24 pounds by 12/31/2010 by loosing 2 pounds per month:

January goal - loose 2 pounds = Actual weight goal XX lbs by 1/31/2010

• Start walking 30 minutes a day / three days a week
• Reduce desserts to one day per week (Friday fun night)
• Drink 2 glasses of water per day

February goal…

It is pretty obvious why goals will work and resolutions and just good ideas.  When on set a plan of action with achievable steps to complete the goal then it is easy for your goals to become reality.  Why not make 2010 a year of change.  There’s only a few days left of 2009, but why not sit down and figure out what you would like to achieve next year.  You will be amazed at what you can accomplish if you just set goal!

Is it possible to survive a foreclosure? By that I mean, is it possible to maneuver your way through a foreclosure where you can save your home and afford to make the payments. No one really knows the absolute answer to this question because every lender abides by different rules. However, I think that many make the mistake of just giving up instead of thinking their way through the process.

In this blog I would like to offer a possible strategy that may help you negotiate yourself out of a foreclosure situation. Let me first of all say, this is just based on my opinion and some rationale thinking. If you are one of the unfortunate ones that have been negatively affected by our current economy maybe something I say may give you some ideas. My main point is to not be a victim. See if there is a way to solve your situation. In some ways you have control considering the dire situation that financial institutions are facing.   Therefore, read this HUB at your own risk, my opinion and $2.35 will get you an Grande Americano at some Starbucks.

Let’s start with the current real estate market.  It is no mystery that in most markets the price of real estate has gone down.  With the recent efforts to get people in homes the ever popular 80/20 lending has put a lot of people into a difficult situation.

If you purchased your home using the 80/20 lending you have two loans on your home.  The first loan was made at 80% of your purchase price while the second mortgage was made at 20% of your purchase price.  This means that you borrowed 100% of the purchase price, which was probably pretty close to the actual value of the home at the time of purchase.

With the current devaluation of real estate you are probably upside-down on your home.  You may be in a position now where you are facing foreclosure because of a pay cut, layoff, or business failure.  Maybe you now have a paycheck, but the payment structure is too high.  Are their any alternatives?

I think so!  Let say that you purchased your home for $300,000.00 using the above method described above.  Not accounting for the minor principle reduction from whatever payments you have made you owe $240,000.00 on your first mortgage and $60,000.00 on your second mortgage.

If house values in your area have dropped 25% then your $300,000.00 home is now worth $225,000.00.  Think about this for a moment because this is very significant (although you must adjust the numbers to your situation).  In essence your first mortgage that was at 80% of your value is now partially unsecured.  Only $225,000.00 of the $240,000.00 is now secured by your home.  Your second mortgage is basically an unsecured loan even though there is a recorded deed against your property.

What typically happens when a family gets into financial problems they try to pay everyone with the little money that is coming in.  The result of this type of payment plan is that everything goes behind and not is accomplished.  Obviously if you have a car and a Mastercard it would make far more sense to keep your car current and let the Mastercard go behind.  What is Mastercard going to do repossess your underwear?

Well, the same is true with the home.  From a strategic standpoint If I had limited income coming in then I would make a strategic decision about how I could put the odds in my favor so that I could keep my home.

Let’s thinking of our home loans from an investment standpoint as well as from the legal structure of home financing.  The two loans on our home are called a “First” mortgage and a “Second” mortgage for a reason.  The are recorded in “positions.”  In other words the first mortgage has the first priority.  The second mortgage is second to the first.  In other words the second cannot do anything to the house without taking care of the first mortgage.  What this means is that if your second mortgage is going to foreclose on your home they will have to either make the payments on the first mortgage and keep it current or pay the first mortgage off.

If your first mortgage goes into foreclosure they have no responsibility to the second at all.  In this situation the lender holding the second mortgage will be notified of the default notice filed on the first mortgage and their only option is to bring the first current, pay the first off, or walk away from their investment.

Considering the numbers we discussed earlier, if you had a loan on a piece of property in the amount of $60,000.00 would you spend $240,000.00 to save your $60,000.00?  To make matters worse, would you spend $240,000.00 to get an asset worth $225,000.00 to save your $60,000.00?

The answer to these questions is “Absolutely NOT!”  That is called throwing good money after bad money.  While no one wants to walk away from $60,000.00 from a financial standpoint it would be the smartest decision.

Now, let’s bring it back to our home.  This is what I would do if I had the above numbers (or numbers where my second mortgage exceeded my homes value), limited income, and wanted to save my home.

First off I would do whatever I could to keep my first mortgage current.  If I came to a place where I knew that I could not keep both payments current I would not split my money between the two mortgages.  I would pay my first and allow my 2nd to go delinquent.  At some point your 2nd mortgage will contact you regarding your delinquency.  They will do everything they can to get a payment out of you, but if you know your numbers you will be in control.  At this point I would talk to them very straight and offer to settle with them.  These companies know that they are in a total loss position and any company with any sense will not foreclose in a situation where they are going to throw good money after bad.

If you are a good negotiator you could actually settle this debt for pennies on the dollar.  The key factor in this is you must get the mortgage released off of your property during this negotiation so I would recommend arranging for payment to go through a title/escrow company.

How much is a company willing to settle a debt like this?  Who knows?   But if you are looking at losing $60,000 in our example and you could collect 5% or 10%, why would you not take it?  Again, it comes back to negotiation and will also depend upon the amount of money you can come up with.

My point in all of this is to try and get a person to think about options.  Instead of just falling victim to the big boys why not think your way through it?  Why not come up with a strategy that takes advantage of the crisis that has caused you to be in a situation where you could lose your home?  As the old saying goes, “Nothing is certain but death and taxes” so I guess all other things are subject to negotiations.

Take charge of your life and win!

Decisions, decisions!  Our ability to prosper or go bankrupt largely depend upon our decisions.  Right now many are feeling the pinch of hard economic times.  It is making it ever more difficult to increase.  However, whether we increase or decrease is really just a simple decision base on basic math.

I have often said that a person can increase making only $1.00 per day.  The concept is actually not a hard one.  As long as you only spend .99 cents or less you have increased.  Now, don’t misunderstand me.  I didn’t say you would have a nice life I only said that you would increase.  Yet this is the core principle that most don’t understand.  No matter how the economy is hitting your life if you will keep your expenditures below your income you can keep your head above water.

In practical terms what does this mean?  It means that there are times in our lives that we have to downsize or find new revenues of income.  It is easy to complain, but the proactive person can stay ahead if they are willing to do what it takes.  The problem is that we have become a society that thinks cell phone, NFL Ticket, Cable, and nice restaurants are a right.  They are not.  These are all luxuries that we may enjoy when we have the money to pay for them.

If you are facing a lost job, a pay cut, or any other set back immediately bring your expenses in line with your cut back.  This may mean you will have to get rid of the nice car and drive a vehicle that’s just reliable instead of one that looks cool.  It may mean that you will have to rid yourself of the iphone upgrade or the fancy cell phone package that has all the new technology.  If you will keep yourself afloat during the difficult times your come back will be much quicker.