It seems that we humans are programmed in such a way that we tend to spend a lot when we have enough funds with us and try to save when we are short of capital. Experts believe that it is grossly incorrect and we should be acting otherwise. Our savings should start when we have lot of funds at our disposal. These funds can be used when we are running short and can be a very useful resource to sustain till the bad phase is over. But since we have the habit of spending and at many times over-spending on not too important things we are not able to strive through difficult times. This is the reason why many people belonging to different industries wind up their businesses in the times of recession. If we analyze the recession period, it does not last more than few months. It is just that we do not have enough capital resources that we get the reason to blame recession for the debacle of our business.
When the economy is hit by depression and then recession, the industry that is affected the most by it is the construction business. Many small time construction houses and also some big houses are swayed out of business. One of the primary reasons why they could not deal with the hard times is that they have to pay their dues to the financial institutions from which they have borrowed huge sum of capital to fuel their growth without even foreseeing the future market conditions.
Since they have too much to pay back and they do not have many projects in hand, they tend to suffer huge losses. On the contrary, the companies that do not have any dues to pay are able to strive during that time. As a matter of fact many small construction companies and contractors were able to carry on their businesses by cutting costs but they did not have to wind up their shops.
This is perhaps a good lesson for all those who get into the mode of spending more whenever they earn huge profits. They should rather save more for the difficult times. They can allocate an amount for contingency purpose and keep adding money to that account. They should keep growing the amount in that account so that whenever they need to take any major business decision that requires money, they have a sizeable amount in their kitty that they can look at. In this way, they also reduce their dependency on financial institutions that are ready to lend you money at high interest rates. It makes no point in borrowing money at high interest rates. On the contrary, if you can manage to earn some interest by investing in liquid risk-free ventures, it can be highly beneficial for you as well as for the growth of the company.
Eventually, it is the habit that you inculcate in yourself. You have to instill the habit to save money and invest it rather than spending on not so important things.