How To Survive a Recession
A recession is known by many names - sometimes it's called a 'weak economy', a 'sluggish economy' or an 'economic downturn'. This article shows you how to survive during a recession.
Look for the Signs
First of all, many times a recession in the U.S. economy is only recognized and acknowledged by politicians and officials several months after it has ended. According to the Department of Labor and the Bureau of Economic Research, the average American recession lasts for ten months, and the two most recent economic recessions only lasted about eight months each.
During a recession, unemployment typically rises about 1 percent over non-recession figures. You'll see economic jitters in the stock market and falling prices in some (but not all) real estate markets. The talking heads on television will most certainly wring their hands and say that the sky is falling - (bad news is always good for the news business). On the other hand, investors in real estate and in stocks take advantage of falling prices to acquire good stocks and properties while the prices are temporarily lower. Bob Thornton, a respected Florida-based real estate investor says "Everything in the store eventually goes on sale sometime. It's just real estate's turn".
Regroup and Reorganize
None the less, there are many specific steps you can take to not only 'survive' a recession but also to 'thrive' during shaky economic times.
Let's take a look at some specifics.
Reduce or Reallocate Expenses
I have a business friend who swears he can't live without his $9 cup of fancy foo-foo coffee everyday on the way to work. That's $2,160 a year. He could be use that money to reduce his credit card debt or it could go into his retirement account to be invested for his future. We take a lot of expenses for granted that are not really necessary. These are called 'discretionary' expenses that may not pay us back for the money invested.
Business owners should always look at dollars expended as being investments in the business. That is, make every dollar spent either in support of your business or in marketing it to your potential customers. Look at every dollar in terms of 'what can it do to support, grow and expand the business.'
On both a personal and business level, there are a variety of checklists that can help you. One website - http://beingfrugal.net has a very checklist on surviving a recession in its 2008 archive of articles.
Spread Your Risk and Think Long-Term
If you're a stock investor, look into well-balanced mutual funds with a 5-year or 10-year track record that reflects both bull and bear markets. That way you're dollars are diversified across hundreds of stocks and overseen by professional managers whose compensation is tied to the fund's performance.
If you're a real estate investor, take advantage of the fact that sellers are competing for buyers - often selling properties just for the amount owed on them. Also look at different forms of real estate investing - including tax liens, trust deeds and other forms of 'paper'.
Look at the long-term when considering investments and business moves. As a general rule of thumb, recessions tend not to last very long - usually from 9 to 18 months. They are counter-acted by moves in the Fed's interest rate, by adjustment of loan qualifications, by government spending policy and by consumer spending at key times of the year. 80% of the recessions since 1948 have lasted less than a year with the recessions of 1990 and 2001 each last only 8 months.
Emergency Fund
If you don't already have one, get an Emergency Fund going. Consider putting money into your emergency fund an expenditure of the first priority. Many financial planners say that an emergency fund should be built up over a period of time so that you have at least one or two months worth of normal expenses set aside in a safe, conservative account. Experienced planners say that three to six months is even better.
Your credit cards should not be your emergency fund. Using them only makes matter worse and digs you into an even bigger financial hole. Instead, look at every possible viable alternative before turning to credit cards to get you through any thin period.
After the recession is over and things are turning around, you should commit a steady and consistent percentage of your income to renewing and building up your emergency fund 'for next time'.
Focus on Where You're Going
Don't lose sight of your goals. Yes, they may need to be readjusted for a time during a recession but remember that a recession is by its nature temporary. The end of the recession won't be announced with trumpets blaring and sirens going off; however, things will eventually turn around so that better times have arrived. If you're an investor, you'll be tempted to cash out poorly performing investments. But be careful and look before you leap at the underlying basis for the investment. Is the underlying value of the investment something that stays with it even though the price varies up and down during different markets? If so, then unloading it during a temporary recession may cause you to lose money. On the other hand, if the inherent value is something that stays with the investment in both good markets and bad, then instead of unloading it when prices fall, you may want to use the opportunity to get more.
Take a Skills Inventory
Regardless of your age, you can 'find a home' if your skill set is worthy of an employer taking a risk on you. If you're working for someone else (rather than yourself), do a skills inventory and beef up those that need to be improved. Your skill set is really what makes you attractive to a prospective employer.
If your professional resume is outdated, dust it off and update it. Put some feelers out among your friends and contacts, and don't be afraid to reach out beyond the locality in which you now live. Also, make sure that you are perceived at work as a 'valued employee' instead of someone who is expendable if things get tight for your employer. To avoid being laid off, strive to be among the top five percent of the employees.
Spread Your Net
This is the time to network a lot more than you might usually do. Take the time to search out meet-and-greet networking meetings of business people in your area. See what the chamber of commerce or other business associations in your area might be sponsoring. If you belong to any associations or clubs, make an effort to reach out and let people know you are 'looking'.
Networking itself is a skill everyone should develop. Doors that close on you only stay that way if you don't do anything about it. Networking in your industry or skill set is a great way to not only open doors for employment opportunities but also make new friends. Relax, be ready to help people remember your name and contact information, and don't be afraid to shake the hand of someone you haven't yet met.
Bottom Line
It's up to you to prepare and be ready for a recession. It's your responsibility to take the initiative and keep your ear to the ground listening for signals that won't always be obvious at first. Remember that a stampede can be heard and felt before it reaches you. By the time it does so, preparing for it is too late.
You need to plan ahead and build an emergency fund to give you a financial cushion. A recession isn't always 'announced' or 'proclaimed'. It builds over time, and the smart money is preparing for the worst and hoping for the best.
If you've waited too long to prepare, it can catch you by surprise. Look at the signs around you, read the music that's being played in the media and in the business environment in which you operate. Keep your eyes open and look for ways you can take advantage of the changes. Once you see a recession on the cover of most print media (newspapers and magazines), it's already arrived and your preparations are behind schedule. So take the time now to build your resume, to review your list of contacts, and consider what you need to do so you're not a statistic of the recession.
Source: http://ezinearticles.com/
Added: April 25, 2008
US recession looms as jobless totals hit five-year high - Telegraph.co.uk
Clackamas Review US recession looms as jobless totals hit five-year high Telegraph.co.uk, United Kingdom - By James Quinn, Wall Street Correspondent The chances of the United States entering an economic recession heightened after the unemployment rate hit ... Recession fears reignite as unemployment rate hits 6.1 percent US Recession Hits; 84000 Jobs Lost; Unemployment at 5 Year High AHEAD OF THE TAPE -