Being Prepared During Today’s Recession

28
January

There is no denying it or avoiding it, we are in a recession. Even though we are not sure how much longer it will last or how much worse it could get, we do know that this could possibly be the worst financial crisis that we will live through. Those getting ready for retirement have seen their investments and retirement plans eroded by 30% or more. Even the banks are under severe stress not only in the United States, but also around the world.

The good news about all of this is that there are steps that we can take to prepare us for the possibility of even more financial hardships in the future. Of course, there isn’t a magical way to make everything better, but there are some simple things that we can do to make certain that we are prepared for the worst. One thing to remember is not to panic. Back in October 2008, panic selling was happening on Wall Street. Everyone knows that you are not supposed to sell out of fear, but fear got the best of them. This is an example of the wrong way to handle a recession.

One thing you need to remember during a recession is to protect your income. First things first when protecting your income is protecting your source of income, your job. This should be your number one priority when in a recession. This could mean putting in more hours at the office and going above and beyond to prove that you are needed in that company. If you can keep your job during the recession, chances are you will do just fine. The last thing you want to do is to be unemployed when the unemployment rate is up 10%. Jobs are hard to come by with this kind of competition.

Even though I just mentioned that keeping your job is your number one priority, you always have to be prepared in case you were to lose your job. Some layoffs are unavoidable. It doesn’t matter how secure you feel your job is, start preparing for the worst to happen. Preparing for a layoff includes having your resume’ updated, knowing friends or colleagues with contacts for future jobs and knowing where you would like to or would be able to apply for a job. Half of the battle is won if you are prepared and you have a plan in mind.

Ok, you have a job and you are prepared to be laid off by having a back-up plan. Why not earn some extra money as well? A second income could be your saving grace if you were stuck between jobs. There are many ways to make extra money whether it be through the internet at home or going to work at a second job. How much extra should you shoot for? Well, let’s say that you need $5000 a month to live on. $1000 extra a month will increase your emergency fund by 20%. That emergency fund sure would come in handy if you were to lose your job and you couldn’t find another right off.

Another tip for living in a recession is to reduce your expenses. One positive element of the recession is these extremely low interest rates. If you have a high interest rate or an adjustable mortgage rate, maybe it’s time to think about refinancing to a fixed rate loan. This may not apply to everyone. You have to have good credit to be accepted for refinancing, but if you can get a lower, fixed rate, you can save more money and reduce the risk of a rising interest rate. Other interest rates that you can lower are credit card rates. This can be done by moving balances over to a 0% APR balance transfer card or a lower interest credit card.

Of course, the obvious way to reduce expenses is to reduce your spending. Pick things that you can do without or that you can skimp on like internet speed, movie channels and something even as simple as hitting the coffee drive through on your way to work every day.

Probably the most important thing to remember is to never stop saving and investing. This may not be easy, but what you do with your investments now and in the near future will predict how much you have at retirement. Again, don’t sell out of fear! Keep saving. Like I said earlier, an emergency fund could be your saving grace. So, how much is enough to have in your emergency fund? It really depends on several things as to how much is a good amount to have saved up but most go with six months’ pay.

In closing, things might seem bad now, but if you don’t prepare for things to get worse, you could find yourself in an even worse situation. Hope for the best but be sure that you are always prepared for the worst.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

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