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Preparing for Recession - The Dollar Stretcher
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Preparing for Recession

Lately it seems everyone is talking about a possible recession (or even a depression). When the Federal Reserve drops rates by 3/4% between meetings it's probably time for all of us to take notice. No one knows for sure whether we'll end up with a recession or not. But, as we all do know, it's always better to be prepared for financial challenges. Just in case.

The first thing is  to know what your current position is. Are you spending more than you're making? Do you even know? Where does your money go each month? The only way to really find out is to track your spending for a month and compare it to your income. Don't forget to include items that happen just a few times a year (property taxes, auto insurance, etc). If you are working you should be making more than you're spending each month. That extra money can be used for paying down debt or building an emergency fund.

Next, pay down debt. It's easier to survive a job loss if you don't have a lot of bills each month. Now is the time to reduce credit card balances. Even it it means taking a second job or cutting off cable television. You'll be tempted not to do anything. Just remember that if you do lose your job it will be too late.

Look for big savings items. With lower rates now might be the time to refinance your home or car. Compare insurance rates. Make sure that you really can afford the house or car you're paying for. Typically if your house is over 40% of income or your car is over 20% you need to do radical surgery. That means moving to a cheaper home or car.

Take a serious look at your food/grocery/eating out expenses. Most people spend 15 to 20% of their money on food. But, it's real easy to spend more. And, it can happen a little at a time. That luscious $4 dessert won't bankrupt you by itself. But, it will take you one step further from your goal.

Look at your employment situation. If you're honest with yourself, it's not that difficult to recognize job troubles ahead. Is your employer in trouble? Is the whole industry suffering? Could your job be done by someone else for much lower pay? Either within the U.S. or without? Does technology threaten your job? If you can answer 'yes' to any of those questions, you'd be wise to consider what your life would be like without your present job. 

Ask yourself if you'd be likely to find the same type of work at a different employer. It could be that your field is changing. That happened to me. If you're facing a similar situation begin learning a new trade now. Don't wait until you lose your job. Waiting will only make the transition longer.

No, I can't say whether you'll be affected by a recession or if there will even be a recession this year. But I can tell you that you'll be better able to handle one if you begin preparing now. 
 

Published Jan 23 2008, 10:40 AM by Gary
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Comments

 

Pat said:

Excellent post. You brought out some things that everyone should be thinking about right now. Getting out of debt is probably the one most important thing anyone can do to better situate themselves for whatever may come.

January 23, 2008 10:25 PM
 

Encourager said:

Many good points! Another thought: if you live near a college, consider renting out a spare bedroom(s) to a graduate student.

We are on the verge of retirement and still have a mortgage which we are paying down as fast as possible. That is the only debt we have. We still should be living as if our income is what retirement would bring in but that is such a hard step!

January 29, 2008 11:40 AM
 

Cookie9162 said:

Hi,  everyone!  I feel that I have just taken one more step toward being "recession proof"  in that,  instead of paying 400 times what one needs to to get a warm breakfast beverage (e.g. coffee shop latte),  I have just made my 1 cent cup of tea (you know,  the 100 tagless teabags you can get at Super Wallie's).  I find that it is very good with a little honey in it.  From experience in the past,  I know that I can do with skim milk in it,  too,  so that saves!

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About Gary

For more than 25 years, Gary Foreman has worked to manage money effectively. Prior to starting The Dollar Stretcher, he was a financial planner and purchasing manager. While helping clients manage their hard earned money as a financial planner, he applied commonsense, time-tested techniques during the turbulent 1980’s. The experience convinced him that you didn’t need to hit the lottery to accumulate significant wealth. Following that, Gary had an opportunity to learn more about how to get the best value for a dollar spent in the corporate world. As the Purchasing Manager for a computer manufacturer, he was responsible for supervising over $10 million in annual purchases. Gary began The Dollar Stretcher website <www.TheDollarStretcher.com> and newsletters in April 1996. Over 300,000 readers benefit from the time and money saving ideas presented in The Dollar Stretcher newsletters each week. His mission is to help people "Live Better for Less". He also provides private label newsletters for companies wishing to provide money saving information for their clients and/or prospects. Gary lives in Florida along with his wife of thirty years and their two children. Much of his time is spent working with the men's ministry of his church. One of their ongoing projects is the "Holy Smoke BBQ" which sells bbq on Friday nights with the profits going to support local foster kids and orphans. When he has a free moment you’ll find him restoring a Checker station wagon nicknamed “Two Ton” or cruising in a '65 Impala SS Convertible with doo-wops playing in the background.

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Gary is a former financial planner and purchasing manager who edits The Dollar Stretcher website <www.stretcher.com> and newsletters. You can follow Gary on Twitter.com/gary_foreman
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