How To Beat the Odds in a Recession

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It seems apparent that a recession, if not here already, is imminent. Frankly it is even necessary. But I won't get into that for this discussion. I want to talk more about things you should be thinking about in order to best prepare yourself for an economic downturn. Employment During recessions it is highly likely that many people will lose their jobs and have to turn to alternate sources of income, including taking on lesser paying ones. So, it is best if you are employed now to find any areas you can cut back a bit and save more. Get those emergency funds in place and make sure you have enough savings to cover costs while you are either out of work or earning less pay. Debt If you have credit card balances, car notes etc., the time is now to begin reducing the balances so that either the burden is less with no income or less income, and so that it may also provide just a little bit of extra cushion in the meantime. I never recommend using credit as a solution to a money problem. But there are times when a little extra help is necessary, especially if you have not done the proper planning to ensure you have enough emergency funds in place, or the recession lasts longer than your funds will allow for. Evaluate your spending and make adjustments You need to be looking at what you spend money on now, and determine what are going to be your most important expenses to cover when money is tighter. Shelter is first and foremost. You have to have a place to live. So you need to prioritize making sure you have enough to cover your rent or mortgage. Now might be a good time, if you are a renter, to consider downgrading a bit. Utilities are also rather important. You need to keep the lights on and things in working order. And of course being able to afford running things like heat and air conditioning are also health considerations. Food is also a great concern. Now would be the time to evaluate how you eat, where you eat, and what you eat and see if there are things you can do to reduce certain grocery costs. Cooking at home should be a priority as well as preparing meals from scratch, which is cheaper than buying prepared, processed foods. Using more coupons and bargain shopping and having the ability to stock up on bargains is also something you need to consider being able to allow for. Are you on certain medications? Because that is an important consideration as well, especially if they are medications absolutely necessary for maintaining and controlling life threatening health conditions. Invest Investing should be a part of your everyday life anyway. But it can become even more important in tougher times because those investments, and increasing your positions, can actually create more income that could be used to help lighten the blow for you. Even just a simple $10,000 investment can bring in an additional $50 a month. Be more concerned about getting that emergency fund filled One thing people tend to resort to in tougher financial times is of course, as we discussed, credit cards. But people also tend to dip into retirement accounts such a 401k plans or IRAs. This is a definite no-no because while it may help in the short term, the long term effects on your retirement years is devastating. Not only do you lose time for those investments to grow, the penalties for early withdrawal are severe, causing one to lose roughly half of their money. If you have funds you can rely on such as an emergency fund, you will have less need to go into debt or destroy your retirement. The bottom line, know it is coming and be prepared The most important thing is that you are aware of what's coming and make the plans now before it is too late. The more you can do today to begin the process of trimming costs and adding to your savings, the more prepared you will be to deal with and navigate through the tougher times—making life much better as well for you when times get better again. If you take the necessary steps today to be prepared for tomorrow, when times get better you won't waste the opportunity catching up from all the mistakes you made in the recession. You will actually be able to reap the benefits of having been prepared and push ahead in better times. Being even more prepared when the next uphill battle comes around.