Recession Proof Your Life Part 1

I was actually out doing various speaking programs on this subject back in the beginning of 2008.

No one wanted to listen to me, “Mr. Gloom and Doom”.

Yeah, you know what?  Reality bites … can you hear me now?

This is the first of five parts of an article I wrote in January 2008 summarizing the material from my talks.
———————-

With just about every financial prognosticator coming around to the view of “not if, but when” the US economy will be in a recession, now is time to take action.  Waiting until the next few quarters of economic growth have confirmed that a recession is upon us, lumps you in with the rest of the crowd.  Just like any good investment, you want to get in on it before everyone else figures out what’s going on.

This Article is organized into 5 parts.  Part 1 briefly discusses the mechanics behind the current economic situation and just what a recession is (kinda boring but if you don’t know, read it anyway).  Part 2 contains a variety of guidelines on what you can do to protect your finances and manage the money you have when the economy is looking grim.  Part 3 discusses strategies for keeping your current job (if you are lucky enough to have one).  Part 4 gets into one of my specialties: helping you to thrive.  Wouldn’t you like to be in the situation of not only being unconcerned about what is going in the broader economy but actively excited and anticipating these changes and the opportunities they will present?  I thought so.  The fifth and final part will provide you with a list of resources that you will find useful as you make some decisions – both near term (tactical) and long term (strategic) – about your future.

What Is a Recession Anyway?

That’s when your neighbor loses his job (a depression on the other hand, is when you lose your job).

OK … OK … a recession – if you don’t know by now – is technically considered to be two consecutive fiscal quarters of negative economic growth, measured by the US Gross Domestic Product or GDP (if you don’t know what that is, check out http://www.investorwords.com/ for a definition of GDP and just about anything else about investing or economics).  The tricky thing about figuring out if you are in a recession is that you don’t technically know until you have been in one for nearly 6 months as this is when all the statistics are rolled up to let the Powers That Be make the call.   By the time you are reading this Report it may not be a likelihood but a reality as the current media talk has shifted from debating the possibility of a recession to the speculation as to the kind of contraction that will take place.

So what will the 2008 recession look like?  There are two parameters to consider: how long will the recession last and how bad will it be.  Will the slump have a V- (short and severe) or a U-shaped bottom (long and shallow), or some combination of the two (short and shallow, long and severe)?  The roots of this (potential!) recession have to do with home-loan defaults, falling home prices and cascading credit problems at financial institutions.  This has crushed the industries associated with real estate: lenders, mortgage companies, painters, Realtors, home builders and suppliers … you name it, if they had something to do with the housing industry, they’re hurting now.  The reason for pointing all this stuff out is that all these losses lead to layoffs, which leads to a rising unemployment rate in the U.S., which leads to slower consumer spending.  Since the consumer accounts for more than 70 percent of total spending, most recessions are consumer driven,.  Since the option of using our houses as glorified ATMs is no longer available, it all leads me to conclude that we’re staring straight down the nose of a genuine recession.

But, enough of the economic commentary.  Suppose we are going to be, or are already in, a recession, what can you do to keep your finances and life above these troubled waters?  At a minimum, hopefully you now believe it may be useful to do … something …just in case!

See Part 2 of this Article (to be posted October 21).