2009...a lot like 2008, only worse.

SavvyFrugality — Fri, 09 Jan 2009 04:05:00 GMT

The New Year is always an exciting time. As we count down the seconds until midnight, we look forward to a fresh start, new and exciting challenges and the opportunity to improve ourselves, either by losing weight or quitting smoking. This year, many are hoping that the New Year will bring with it economic recovery and prosperity.

Unfortunately, they will have to wait awhile longer.

All signs are pointing to a more prolonged and deeper recession than anyone had initially thought. It's not that I have a crystal ball or anything. I'm just listening to what the people who are running the economy (or will be running the economy) are saying. Other signs point to a stale economy in the year ahead:

President-elect Barak Obama - says the U.S. recession could drag on for "years" without bold economic reforms.

Boston Federal Reserve Bank President Eric Rosengren - says the recession will be longer and more severe than originally forecast.

The U.S. Chamber of Commerce -says the U.S. will "hit bottom" in mid-2009.

Retailers - High-end department store Macy's is closing a number of stores around the country. Circuit City, Linens 'n Things, and KB Toys have filed for bankruptcy.

Things aren't all bad. For example, Rosengren also said he feels the U.S. economy will probably start to rebound in the second half of 2009. Historically, recessions in the U.S. haven't lasted much more than two years at a time. Of course, there is always a first time for everything. The U.S. economy didn't get into this bind overnight, and it will take time to recover.

As for me, I have a few resolutions for this New Year:

Save, save, save - All of my discretionary funds are going into my savings account.

Investing - Stocks are on sale right now, if you've got the stomach for it. Personally, I'm sticking my cash in savings accounts and CDs. My stock purchases are limited to companies that I'm fairly certain will still be around after the economy rebounds, but I admit I haven't been putting as much into my ING Sharebuilder account as I used to.

Shopping locally - This is just a personal choice for me, but when I do have to make purchases I'll do my best to buy from small, "mom-and-pop" retailers in my local area. The strong "big box" stores will survive the recession, but small businesses are the backbone of our communities. They need all the help they can get.

Dumping my debt - Money that isn't going to savings is going to retiring as much debt as possible this year. I won't be totally debt-free in 2009....I'm still paying off my mini-van and a student loan...but I'll be doing my best to get rid of all other debt. Not owing anyone any money is a nice security blanket to have during a down economy. You only need to be concerned about day-to-day living expenses like food and shelter.

How about you? What are your New Year's financial resolutions? Do you see things getting better in 2009, or worse?

Main Street Meltdown Recommended Reading: Should you bite on those crazy car deals?

The Worst is Yet to Come?

SavvyFrugality — Mon, 24 Nov 2008 03:33:00 GMT

With banks failing, unemployment rising and the stock market in freefall, many people are hoping the U.S. economy has "hit bottom", and better times are on the way next year.

Don't bet on it.

The International Monetary Fund's chief economist, Olivier Blanchard, says worse times are on the way and the economy won't begin to improve until sometime in 2010. Echoing this sentiment, president-elect Obama said the U.S. could experience the loss of "millions" of jobs next year. With projections of gloom and doom just around the corner, what can we do to "recession proof" ourselves as much as possible?

1. Insure your most basic needs. Namely, shelter and food. Stick any extra money you have now in a high-yield, FDIC-insured savings account to help cover rent or mortgage payments should the worse happen and you lose your job. Ideally, your emergency fund should have three to six months of living expenses in it, but if you don't have an emergency fund, sock away as much as you can now. Take a part-time job. Bank away unexpected windfalls. Sell stuff you don't need anymore on eBay. Stockpile dried goods in a closet designated your "emergency pantry". This might include canned goods you stock up on at a great sale, bulk purchases of rice and dried beans, tinned meats, anything that will keep for long periods of time until you really need it.

2. Diversify. Your retirement account should already be diversified. This means "don't stick all your eggs in one basket". Your retirement account should NEVER consist mainly of stock in the company you work for. The more diversified your account is, the better it will weather the storm.

3. Don't buy things you don't need. This is hard right before Christmas, but now is not the time to make large purchases of luxury items like high-end electronics, appliances and cars. If you can't pay cash for it, don't buy it.

4. Be the "go to" person at work. If you work for someone other than yourself, make yourself indespensible. Volunteer to take on additional projects, strive to do your best work, and look for ways to make your employer more money or find better ways of doing things. Be the first to arrive and the last to leave each day. If you are a model employee, the boss will look elsewhere if they have to start trimming payroll.

5. Diversify your income. Don't just have one source of income. Do things on the side, as long as it doesn't violate an agreement you have with your main employer. Do some consulting, Sell your arts and crafts. Become an avid eBayer...anything you can do to bring in extra income. Sock the extra cash away in your emergency fund.

If the head economist of the IMF and the incoming president of the U.S. are saying that things are going to get much worse before they get better, we should probably listen to them. We all have a head-start if we haven't yet been affected by hit the economy has taken. Take advantage of it.

Main Street Meltdown : economy

2009...a lot like 2008, only worse.

The Worst is Yet to Come?