While the troubles that brought low Lehman Brothers, Northern Rock, and others in the last few months continue it's worth pondering the personal finance implications. A similarity in many of the bailouts has been the repetition of the explanation that '...there are plenty of assets just a temporary need for cash...' Of course this is only part of the story. There are usually plenty of assets that either cannot be readily turned into cash, or they could be - only at bargain basement prices. That's the reason why holding investments on your accounts at market prices, not book prices, is considered the more realistic approach.
But we digress.
You may not be Lehman Brothers (but take a look outside for two fetching secretaries, and a massive Lincoln Town Car just in case) but you could suffer from the same problems. Especially if you are one of the more than 100,000 people who became a landlord over the last few years, expecting the triple miracles of inlfation, immigration, and insane regulations to make your mouldering pile of pine and plaster to yield incredible riches.
But you may have behaved even less wisely. Perhaps you didn't even by a house, just a couple of cars, lots of whiteware, and a new bathroom. All on the marvellous news that your house had more than doubled in value and heck - your income was rising nicely. But the tide has turned against you, not long after you increased the home loan, up went mortgage rates, fuel prices, food, school fees, local authority rates, tax on petrol, you name it, it went up - except for your income. Overtime became a thing of the past.
So if you're looking to avoid the consequences of such a crunch, remember, cash is king. That's why certain kinds of savings are better than others right now. As almost any Lehman Brothers executive could tell you, liquidity is what's needed. So stop shopping, defer major purchases, have a trademe sales binge, cancel subscriptions, ditch one of the cars, downsize the other, take in a boarder, switch to house brands, even - if you have room, refinance credit card debt into your home loan, then cut up the cards - do anything to increase cashlfow, and do it now, before it's too late, oh, and do not do KiwiSaver!