Survive the Recession
For the past few months, the word recession has been hitting the news wires almost as often as Britney’s custody battles. Experts use all sorts of indicators to determine when a recession hits. Perhaps the most common one is the GDP, or gross domestic product. GDP measures, in dollars, the value of all goods and services produced in a country. When the GDP goes up, it means companies are producing more and consumers are buying more. In short, the economy is growing. When the number goes down for two consecutive quarters, economists raise the recession flags.
During a recession, the economy shrinks for a certain time period, usually between six months and two years. Companies earn and produce less, and consumers (that’s you!) tend to keep their dollars tucked under their mattresses (or bras, in some cases). A shaky stock market, a housing slump, or a rise in unemployment can also be signs of a pending down cycle. Looking at the big picture, many economists feel the U.S. is on the verge of a recession or has just entered one. Here’s what you can do to ride out the economic storm, should the clouds roll your way.
Pay off debt. If you have lingering credit-card debt, now is the time to pay it off. If you can, get rid of other big bills, too. While paying off debt is always a smart move, it’s even more important when a recession is on the horizon. If you end up with less money in your bank account, you don’t want to have to deal with sky-high credit-card bills each month.
Start a savings account. Financial advisers recommend having a stash set aside for a rainy day. On average, this should be around six months of your salary. Don’t have that much lying around? Look for ways to trim extra expenses and put that money in the bank. If anything unexpected comes your way, you’ll be ready.
Keep your eye on the job market. Some areas of employment are hit harder than others in a recession. Usually government workers, health-care providers, and teachers aren’t affected in a down cycle. Those in fields that depend on disposable income, like luxury-goods retailers and construction companies, take a heavier hit. If you hear rumors about layoffs at your company, look into other areas of work.
Become invaluable. If you want to stay at your current job and move up the corporate ladder, take steps to make yourself stand out above the rest. Solve a problem in your department, write an impeccable report, or let your team-player qualities shine through. If the time to make cuts comes, your boss will be more likely to hang on to your position.
With a little planning, you’ll have your financial umbrella ready when the rain comes. The good news is that recessions are a natural part of the business cycle. Eventually, the economy will come around and grow again. And when it does, you’ll be ready for the ride.