Wealth buildingManaging your Finances During a Recession
In early 2008, recession is definitely the buzzword of the day. Before we talk about how to stay afloat during a recession, let's define what a recession is. The simple definition is this: An extended decline in general business activity. However, when you hear about a recession in the news, they are typically referring to the broader definition with reference to the country's economy.
The National Bureau of Economic Research formally defines a recession as three consecutive quarters of falling real gross domestic product.
Surviving during a recession (whether it be broad-based, just in your state, city, or even company) is no easy task. Money is tight, and for most Americans, this means that before you were making it from paycheck to paycheck, but now you aren't. That squeeze can have many effects, many of them not just financial. Stress leads to depression, which leads to decreased productivity, and the cycle continues.
The first key to surviving a recession is to realize that it will be over soon. Most recessions typically last for 6 to 18 months. This can seem like a long time during the recession, but it's really not that long in the larger sense of things.
Here's 5 things to do to manage during a recession:
1. Refinance your mortgage. Almost every time we are heading into a recession, or already there, the federal reserve will lower interest rates to stimulate the economy. If you're in a high-rate mortgage, refinance now. Not only will it lower your payment, you'll save thousands of dollars in interest over the long term.
2. If your finances are tight, resist the urge to splurge. If you don't need it now, wait until the recession is over. You'll thank yourself later.
3. Keep your job, or get a job! Employers feel the squeeze during these times, too, so make sure you are not a dispensable employee. Shape up if you have to, and make sure now more than ever you are doing what's best for the company.
4. If you happen to have a little extra spending cash, now is a time for good deals. Companies need to stimulate sales, so they will be offering their best deals. Just like mortgages, if you've had your eye on something special (and you have the funds) now's the time to buy.
5. Don't stress out. If you're struggling financially, so is almost everyone else. Just track your money closely, don't spend more than you earn, and take extra time appreciating the things that matter most in your life.