How to Prepare for a Recession

Posted by: Gene M. | Jan 11,2008


Understandably, there’s been a lot of conversation here about a recession.  The big word has reared its ugly head.  It’s not just a “crisis” limited to one sector of the economy, but an across-the-board economic downturn.  You may read about it and think, “What in the bleep can I do about it?”  Maybe you won’t swear, but people are pretty worried about the prospect of a recession.  

So what can you do?  First, what exactly is a recession?  Simply, it’s when the Gross Domestic Product declines for consecutive quarters.  Companies are earning less, paying less, as are consumers, so things are generally not as prosperous as they could be.  The worst thing that could happen to you during a recession is that you could lose your job.  There’s not much I could say to keep this from happening except to do your job well.  

Your job standing is not always in your control.  You’re more in the driver’s seat with your personal financial standing.  Really all you need to do is search around this site for info about how to get out of debt, build savings , and start an emergency fund.  Preparing for a recession is really no different than being financially healthy in non-recession times.  It’s just that in a recession, or on the cusp of a recession, it becomes a little more urgent.  

So all the things we write about here about getting out of high-interest credit card debt and building a savings account should be heeded ten-fold now that a recession is on the horizon.  As a Boomer facing retirement I would recommend looking more towards the immediate future than deep into retirement.  This means maybe not putting as much money into a 401(k) and instead putting that money into savings and/or an emergency fund.  Generally, you want to budget effectively, as you always should have been, pay down debt and save as much as possible.  This was always important, but more so if the country struggles on the whole.  

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