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The March 2008 issue of Money has an article by Stephen Gandel about how to recession-proof your life. “We may or may not be entering an official recession,” he writes, “but either way 2008 has gotten off to a scarier start than most anyone predicted.”
To lower your anxiety level Gandel recommends that you first learn the facts. Educate yourself about past recessions. Try to avoid the media hype — it will cloud your perspective.
Next, shore up your balance sheet. When times are tough, it’s even more important to cut spending, trim debt, and bolster your emergency fund. During a recession, you want to be especially prepared for unexpected financial setbacks.
Gandel also suggests that it’s time to shore up your portfolio. If you’re really scared, consider putting more money in bonds. Otherwise, just keep a balanced portfolio with some overseas investment. (I haven’t covered any of these topics yet at Get Rich Slowly — someday, someday.)
Finally, work harder and smarter. “The best way to blunt a recession’s impact on your family is to keep your job,” writes Gandel. To the extent that you can, make yourself valuable at the office. If you’ve been telecommuting, consider spending more time actually in the office. You want your boss to view you as an important part of her team.
Basically, Gandel is saying that tough financial times require getting “back to the basics”. When the economy is good — especially your personal economy — it’s easier to slip into bad habits because there’s a greater margin for error. But when times get tough, it’s especially important to practice smart personal finance.
[CNN/Money: Survival strategies: Recession-proof your life]
This article is about Basics, Hints and Tips, News, Planning Monday, 25th February 2008 (by J.D. Roth)
February 25th, 2008 at 4:44 pm
You mean “recession resistant”. You know how disappointed I was as a kid when my waterproof watch stopped because I took it into the pool?
February 25th, 2008 at 5:01 pm
I try to live so that I can make it when times get tough - and thrive when things are going well. With this mentality, I don’t feel deprived during down times, but I do feel blessed during good.
NCN
February 25th, 2008 at 5:28 pm
It is all a matter of perspective. If you have a good job, a recession is a opportunity to buy great companies at a bargain price.
Best Wishes,
D4L
February 25th, 2008 at 7:06 pm
I’ve found that being frugal can help you become a more valued asset at your company. It’s no big secret that company’s are wasteful, so help your company save money, like you help yourself! I just found a way to help my company save $2 million + a year!
You can check out my most recent blog on it!
-Daniel
http://www.youngandfrugal.com
February 25th, 2008 at 7:35 pm
Great timely post. Especially happy that you included, “Keep your Job.” It is interesting that people will run around to save $1 on Tide, but won’t do the things that can add 1% to their income!
February 25th, 2008 at 7:52 pm
Liquor stores, fast food, and convenience stores are largely immune to recession, unless they are dependent on an immediately proximate workforce subject to downsizing.
February 25th, 2008 at 8:13 pm
Always have a back up plan at your job.
My father in law always had a complete business plan sitting ready. On two separate occasions, he was called in for the “downsizing” speech, but he used both opportunities to present a significant cost savings project to his employer (tens of millions in savings). On both occasions, he was put in charge of the project and made it work.
He was able to weather every storm and retire on his own terms.
February 26th, 2008 at 1:57 am
I just constantly think of a world like that in Waterworld, or of an impending asteroid collision with Earth, and it just makes something like a recession seem not so bad. But then again it also puts me about two nights sleep away from setting up an appointment with my psychiatrist, so maybe not a recommended strategy.
February 26th, 2008 at 6:17 am
It’s a good article, sans the advice to move one’s long-term investments into safer waters. That behavior should depend on one’s time horizon and the transactions costs. Mainly one should consider a more forceful move to bonds if they are approaching retirement and want to lock in gains, but that should be occuring over the life cycle of investing anyways.
But yeah, recessions. A scary media word, not so scary in reality.
February 26th, 2008 at 12:16 pm
I really liked the link to past recessions, however I wonder about the advice on going into bonds with interest rates so low and inflation so high. Don’t bond prices decrease once rates go up
March 28th, 2008 at 1:40 pm
Very important article, especially now, since the economy isn’t doing well.
November 25th, 2008 at 12:12 pm
I am so dissappointed in most people when they take about how bad things are.
I have managed to more than double my income in these “hard times”. However, it did not come without a price - I work a minimum of 280 hrs. per month - but I love my work and the monetary success is sooo sweet