This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Friday, March 14, 2008

The "R" Word

Posted By Paul

So the word recession is being tossed around a lot recently, mostly with a lot of speculation as to whether or not we're in a recession, or headed into one.

So what exactly is a recession? I don't want to go into the definition of recession too deeply (here is the link to the wikipedia definition), but for me when I start hearing the word recession tossed around a lot it means that I get a little nervous.

So what do I do to try to assuage my nerves a bit?

The first thing I do is check my savings account. When people start talking about a recession it's nice to know that my emergency fund is in place.

Then I try to decide if I want to bulk up my savings a little bit. Like my wife and I can decide to skip a few dinners out so that we can put an extra $50-$100 in savings. This helps me feel confident that I can weather the economic storm.

Next I look at everything on the purchasing horizon and decide what can be put off. I'm not talking about canceling your plan to have dinner with friends next Saturday, more like your plan to buy a new big screen TV. Not to say that you can't buy that TV (provided you can afford it) but take a moment and decide if you might want to have the money in the bank for now and buy it when the economic landscape is a little more cheery.

I also look at ways that I can save money if things get extreme (like I lost my job). This is pretty easy for me to do right now since I did lose my job just two months ago (so it's all fresh in my mind). You don't have to implement the extreme measures, but it might help with peace of mind to have them planned out in case it comes to that.

Finally I thank heaven that my wife and I don't have a back-breaker mortgage or a bunch of credit card debt. It's good to know that in case of a rainy day my wife and I can tighten the belt and get by pretty well for a long time if we need to.

Also by living a frugal lifestyle things like an increase in gas prices or the cost of milk doesn't hurt us as much as it would if we were barely making ends meet.

If you plan your finances well then a recession will hopefully just be a minor annoyance as opposed to a rocky time in your life.

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