The thought of the U.S. economy heading into recession is not something to be taken lightly -- it will impact each and every one of us in some way. How? Well, many people will be subject to layoffs or job cuts, but this, however, is a small minority. Most of us will be fortunate enough to maintain employment in times of recession, but we will undoubtedly feel the effects in other ways. Service providers and banks may often instate new service or account fees; employers may pass on bonuses, raises or disband other perks; retailers might raise prices to compensate; and even if you cannot pinpoint the exact reason why, it seems that during these times, your bank account gets hit. Here are some suggestions on how to survive a recession and even come out on top once it has run its course.
Reduce debt (especially credit cards)
It should always be in your financial plan to reduce your debt rather than to increase it, but this is especially important during slower economic times. If you can see the writing on the wall, do what you can to reduce your debt, particularly credit card debt, as much as possible. If you can eliminate your unsecured credit card debt, you will have freed up that much more monthly cash flow to save during a recession. If you are only making minimum payments, that couple of hundred dollars each month can really go a long way. If it is not realistic to pay it all off, it might still be realistic to pay off the card with the highest interest rate to avoid future charges and to free up some monthly cash flow. It may also make sense to transfer all of your debt to a credit card with a lower interest rate. This can be an even more attractive option as interest rates come down, which is the historical norm during recessions.From a long-term perspective, if you can clear your credit during a recession, then you will be in a greater position to borrow in the future, enabling you to take advantage of the many buying opportunities (such as stocks, real estate and businesses) that tend to show up as a result of a recession. Reducing your debts is key when it comes to surviving a recession.
Don’t run from stocks
During a recession, the stock market tends to perform poorly. Naturally, in the interest of surviving a recession, the temptation to get out of all of your stocks and flock to FDIC-guaranteed CDs and savings accounts is very strong. Of course, there is nothing wrong with feeling secure, but these slower stock market times may actually be your best buying opportunities. If you have a long-term time frame and some extra cash on hand, you may be able to buy stock in very established companies at relatively low prices. So, if you have the patience and intestinal fortitude, you can position yourself nicely for the next market run once the economy gets back in gear.The thought of the U.S. economy heading into recession is not something to be taken lightly -- it will impact each and every one of us in some way. How? Well, many people will be subject to layoffs or job cuts, but this, however, is a small minority. Most of us will be fortunate enough to maintain employment in times of recession, but we will undoubtedly feel the effects in other ways. Service providers and banks may often instate new service or account fees; employers may pass on bonuses, raises or disband other perks; retailers might raise prices to compensate; and even if you cannot pinpoint the exact reason why, it seems that during these times, your bank account gets hit. Here are some suggestions on how to survive a recession and even come out on top once it has run its course.
Reduce debt (especially credit cards)
It should always be in your financial plan to reduce your debt rather than to increase it, but this is especially important during slower economic times. If you can see the writing on the wall, do what you can to reduce your debt, particularly credit card debt, as much as possible. If you can eliminate your unsecured credit card debt, you will have freed up that much more monthly cash flow to save during a recession. If you are only making minimum payments, that couple of hundred dollars each month can really go a long way. If it is not realistic to pay it all off, it might still be realistic to pay off the card with the highest interest rate to avoid future charges and to free up some monthly cash flow. It may also make sense to transfer all of your debt to a credit card with a lower interest rate. This can be an even more attractive option as interest rates come down, which is the historical norm during recessions.From a long-term perspective, if you can clear your credit during a recession, then you will be in a greater position to borrow in the future, enabling you to take advantage of the many buying opportunities (such as stocks, real estate and businesses) that tend to show up as a result of a recession. Reducing your debts is key when it comes to surviving a recession.
Don’t run from stocks
During a recession, the stock market tends to perform poorly. Naturally, in the interest of surviving a recession, the temptation to get out of all of your stocks and flock to FDIC-guaranteed CDs and savings accounts is very strong. Of course, there is nothing wrong with feeling secure, but these slower stock market times may actually be your best buying opportunities. If you have a long-term time frame and some extra cash on hand, you may be able to buy stock in very established companies at relatively low prices. So, if you have the patience and intestinal fortitude, you can position yourself nicely for the next market run once the economy gets back in gear.
The media’s discussion of a recession and news circling everywhere can be a positive catalyst to dig into your monthly bills and spending. Use this time and motivation to review all of your recurring expenses, such as car insurance, phone and internet bills, and utilities. Compare services, find new quotes and even get creative about how you handle these expenses. For instance, if you have excellent health, it may be cheaper to get health insurance on your own and forego the more expensive company policy. Also, some insurance companies might offer you a big discount if you pay for your car insurance upfront. Doing such things has the potential to help you save some bucks and reduce your monthly expenses. You should also be aware that big companies are not immune to these slower times, either, and you may be able to take advantage of bill credits or other customer retention programs for added savings.
Don’t escape
It is easy to fall into escapism when things are not going so well and you’re attempting to survive a recession. The Great Depression is referred to as the Golden Age of Hollywood, due to the huge success the theaters enjoyed during this time. Casinos and liquor purveyors also experience up ticks during recessions as people try to gamble and drink away their problems. However, you should pay more attention to such expenses now, when you are focused on surviving the recession, than when things are going well. Make a conscious effort to reduce frivolous spending and note that every retailer is doing what they can to capitalize on these down times -- they know that things are bad for people, and their marketing tactics can make an escape into shopping or entertainment awfully enticing. Simply put, do not pretend that you are not affected by a recession -- you are.Even if you are among the select few with enough means to not even notice the problem, rather than continuing to spend freely, consider diverting some additional cash to investments or finding a good deal on real estate or a new car (if you need one). If you absolutely must escape, consider volunteering for a cause you support. This is an excellent way to have a good time, escape and do it for free. If you have been donating cash, consider replacing the cash donation with an in-kind contribution of your time, which may also be tax deductible.
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