We’re in a Recession

Posted by: Henry B. | Jan 15,2008


What did I say yesterday: don’t look for a silver lining.  I hate to seem like a pessimist, but we don’t have to be in a technical recession for there to be recession-like tendencies.  Another way of putting that is the possibility of a recession is bad enough.  

So my advice to you: act like we’re in a recession already.  What, after all, is a recession but a word?  Chances are that for a lot of people, life during a recession isn’t going to be all that much different than it was yesterday.  Your income’s likely going to stay the same, as will your level of debt.  In some cases, your financial situation can even get better, as the Fed reduces rates to help bring the recession to a close.  

Those people who have high debt and low savings can be hurt by a recession because prices can go up, such as the price of gas.  Basically what it comes down to is that you need to be working on your debt and savings at once – not always the easiest proposition.  To pay off debt, you might have to dip into the money you save every month.  My advice is to not spend all of your monthly savings on debt.  You want to also be building an emergency savings fund, even if you’ll be in debt for longer.  

The truth is you should have been doing it anyway.  It’s shows some amount of irresponsibility if it took the word “recession” for you to start paying off your debts.  You should have been doing that years ago, before the prospect of a recession ever hit the mainstream.  

Be sure, a recession is here because the faint idea of a recession is making investors very nervous.  If this is what it takes to get you more active in fiscal organization, then good.  But this should always be your outlook, even when the overall economic outlook is rosy.  

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