The United States economy, despite the eternal optimism of its people, appears to be headed for challenging times. According to Kim Kahn, of MSN Money:

• About 43 percent of American families spend more than they earn each year.

• Average households carry some $8,000 in credit card debt (this is debatable).

• Personal bankruptcies have doubled in the past decade.

Among the key drivers of debt expansion in recent years:

• Unusually low interest rates

• The rising popularity of Internet shopping, in which credit cards are the currency of choice.

• The hot housing market, which has encouraged buyers to stretch for new homes.

• The aggressive extension of credit to consumers with weak credit scores.

In addition, the number of personal bankruptcy filings in the fiscal year ended Sept. 30, 2003, rose 7.8 percent from the same period in 2002, reaching 1,625,813, according to the American Bankruptcy Institute. That's twice the number of people who filed for personal bankruptcy protection in 1993.

Meanwhile, the dollar continues to lose value. While I recognize the "advantages" claimed by the current administration of this decline, the fact remains that if other markets lose faith in the dollar, they will want to get rid of those dollars and exchange them for more "valuable" currency, such as Euros or precious metals. Where does that leave the rest of us who work for dollars? If foreign dollar holders suddenly decided to cash in, the overflow of money will lead to inflation unless we find a place for all those dollars suddenly flooding into our marketplace. Finally, whether we want to face reality or not, when the bulk of the boomers start retiring and cashing in their 401(k) accounts in the next five to 10 years, there simply won't be enough money in the stock market to support such a massive withdrawal.

Think about it: If 100 people owned all the stocks and 60 percent cashed in, where would all those sold stocks go? Mathematically, there simply aren't enough investors to cover this withdrawal. It's one of those mini-doomsdays approaching that no one really talks about, and perhaps an unspoken reason why President Bush wants to divert Social Security to the stock market. Is it to save Social Security or save the stock market?

Luckily for you readers, good economy or bad, people need walls and ceilings. If they don't need new ones, they certainly need to maintain the ones they have. A skilled tradesperson (like you) has a big advantage over someone who may be more expendable in hard times (like me). So, the first thing a contractor can do to weather difficult financial times is simply to be good at what he does. The incentive never ends for a contractor to be at the top of his game so your own business is your first, best investment, whether it be in training, hiring skilled workers or better equipment that can mean more income.

The second thing to do is diversify. I'm no financial expert and there is plenty of information out there on investment options but consider two tried-and-true investments: real estate and precious metal. When times are harder, real estate is more of a buyer's market. This means there are deals out there for those who spend a little time each week seeking them. Commercial or residential rental property is an appreciating asset (unlike the home you live in, which is an appreciating liability) that offers positive cash flow from tenants in addition to equity cash available upon periodic refinancing. Start a second company to hold and manage real estate (LLC is the recommended entity). There are many ways your contracting company can take advantage of your real estate company and vice versa. Again, research advantages of owning multiple business entities, including one business helping to shelter the other.

The other "all-weather" investment is precious metal, such as gold and silver. Currently, gold and silver bullion is coined so investors can actually purchase legal tender gold and silver coins to hold. Don't expect to make big profits doing this. Simply expect to have your money someplace other than the bank and represented by something other than Federal Reserve notes (dollars). The bullion market is volatile but when inflation and interest rates go up, so does the value of precious metal. In fact, precious metal value is inverse to the economy: If the economy is good, metal is cheap. If the economy is bad, precious metal is in demand. Recently, the Chinese government passed laws that enable the Chinese people to own gold. This could create a much larger demand. Also, metal is consistent. In modern times, an ounce of gold could always buy one good men's suit. At $425 an ounce as of this writing, that's about right, depending of course on one's taste in suits.

Being a good contractor means you'll be in demand. However, when demand lessens, keep the cash coming with diversification.