Look for the Signs

First of all, many times a recession in the U.S. economy is only recognized and acknowledged by politicians and officials several months after it has ended. According to the Department of Labor and the Bureau of Economic Research, the average American recession lasts for ten months, and the two most recent economic recessions only lasted about eight months each.

During a recession, unemployment typically rises about 1½ percent over non-recession figures. You’ll see economic jitters in the stock market and falling prices in some (but not all) real estate markets. The talking heads on television will most certainly wring their hands and say that the sky is falling - (bad news is always good for the news business). On the other hand, investors in real estate and in stocks take advantage of falling prices to acquire good stocks and properties while the prices are temporarily lower. Bob Thornton, a respected Florida-based real estate investor says “Everything in the store eventually goes on sale sometime. It’s just real estate’s turn”.

Regroup and Reorganize

None the less, there are many specific steps you can take to not only ’survive’ a recession but also to ‘thrive’ during shaky economic times.
Let’s take a look at some specifics.

Reduce or Reallocate Expenses

I have a business friend who swears he can’t live without his $9 cup of fancy foo-foo coffee everyday on the way to work. That’s $2,160 a year. He could be use that money to reduce his credit card debt or it could go into his retirement account to be invested for his future. We take a lot of expenses for granted that are not really necessary. These are called ‘discretionary’ expenses that may not pay us back for the money invested.

Business owners should always look at dollars expended as being investments in the business. That is, make every dollar spent either in support of your business or in marketing it to your potential customers. Look at every dollar in terms of ‘what can it do to support, grow and expand the business.’

On both a personal and business level, there are a variety of checklists that can help you. One website - http://beingfrugal.net has a very checklist on surviving a recession in its 2008 archive of articles.

Spread Your Risk and Think Long-Term

If you’re a stock investor, look into well-balanced mutual funds with a 5-year or 10-year track record that reflects both bull and bear markets. That way you’re dollars are diversified across hundreds of stocks and overseen by professional managers whose compensation is tied to the fund’s performance.

If you’re a real estate investor, take advantage of the fact that sellers are competing for buyers - often selling properties just for the amount owed on them. Also look at different forms of real estate investing - including tax liens, trust deeds and other forms of ‘paper’.

Look at the long-term when considering investments and business moves. As a general rule of thumb, recessions tend not to last very long - usually from 9 to 18 months. They are counter-acted by moves in the Fed’s interest rate, by adjustment of loan qualifications, by government spending policy and by consumer spending at key times of the year. 80% of the recessions since 1948 have lasted less than a year with the recessions of 1990 and 2001 each last only 8 months.

Emergency Fund

If you don’t already have one, get an Emergency Fund going. Consider putting money into your emergency fund an expenditure of the first priority. Many financial planners say that an emergency fund should be built up over a period of time so that you have at least one or two months worth of normal expenses set aside in a safe, conservative account. Experienced planners say that three to six months is even better.

Your credit cards should not be your emergency fund. Using them only makes matter worse and digs you into an even bigger financial hole. Instead, look at every possible viable alternative before turning to credit cards to get you through any thin period.

After the recession is over and things are turning around, you should commit a steady and consistent percentage of your income to renewing and building up your emergency fund ‘for next time’.

Focus on Where You’re Going

Don’t lose sight of your goals. Yes, they may need to be readjusted for a time during a recession but remember that a recession is by its nature temporary. The end of the recession won’t be announced with trumpets blaring and sirens going off; however, things will eventually turn around so that better times have arrived. If you’re an investor, you’ll be tempted to cash out poorly performing investments. But be careful and look before you leap at the underlying basis for the investment. Is the underlying value of the investment something that stays with it even though the price varies up and down during different markets? If so, then unloading it during a temporary recession may cause you to lose money. On the other hand, if the inherent value is something that stays with the investment in both good markets and bad, then instead of unloading it when prices fall, you may want to use the opportunity to get more.

Take a Skills Inventory

Regardless of your age, you can ‘find a home’ if your skill set is worthy of an employer taking a risk on you. If you’re working for someone else (rather than yourself), do a skills inventory and beef up those that need to be improved. Your skill set is really what makes you attractive to a prospective employer.

If your professional resume is outdated, dust it off and update it. Put some feelers out among your friends and contacts, and don’t be afraid to reach out beyond the locality in which you now live. Also, make sure that you are perceived at work as a ‘valued employee’ instead of someone who is expendable if things get tight for your employer. To avoid being laid off, strive to be among the top five percent of the employees.

Spread Your Net

This is the time to network a lot more than you might usually do. Take the time to search out meet-and-greet networking meetings of business people in your area. See what the chamber of commerce or other business associations in your area might be sponsoring. If you belong to any associations or clubs, make an effort to reach out and let people know you are ‘looking’.

Networking itself is a skill everyone should develop. Doors that close on you only stay that way if you don’t do anything about it. Networking in your industry or skill set is a great way to not only open doors for employment opportunities but also make new friends. Relax, be ready to help people remember your name and contact information, and don’t be afraid to shake the hand of someone you haven’t yet met.

Bottom Line

It’s up to you to prepare and be ready for a recession. It’s your responsibility to take the initiative and keep your ear to the ground listening for signals that won’t always be obvious at first. Remember that a stampede can be heard and felt before it reaches you. By the time it does so, preparing for it is too late.

You need to plan ahead and build an emergency fund to give you a financial cushion. A recession isn’t always ‘announced’ or ‘proclaimed’. It builds over time, and the smart money is preparing for the worst and hoping for the best.

If you’ve waited too long to prepare, it can catch you by surprise. Look at the signs around you, read the music that’s being played in the media and in the business environment in which you operate. Keep your eyes open and look for ways you can take advantage of the changes. Once you see a recession on the cover of most print media (newspapers and magazines), it’s already arrived and your preparations are behind schedule. So take the time now to build your resume, to review your list of contacts, and consider what you need to do so you’re not a statistic of the recession.

I’m on a mission to help folks become more financially fit, so I’m encouraging readers to start a budget. However, we’ll call it a “Freedom Plan” because our goal is going to be to free you from financial stress and chaos. If you are one of the millions of Americans swallowed by debt, you need one. If you’re one of the millions living paycheck to paycheck, you need one. Even if you have money to throw around, you should still have one. Why? Because you want your money to work for you! Financial freedom is at your very own fingertips.

The basic idea of the Freedom Plan is to find out how much you earn, verses how much you spend. If all goes well, you’re earning more than you spend. If not, it’s time to fix that problem.

*First, you’ll want to find out where you are financially and set goals as to where you want to go. So, grab a pen and paper and start figuring out your net worth. Do this by comparing what you own, or at least the value of it (assets: house, cars, savings, other personal property) to what you owe (liabilities: mortgage, auto loans, credit card debt, etc.). Hopefully, you have more assets than liabilities, but if not, you’re not alone and you CAN turn that around.

*Then, you’ll need to track your spending for at least a month. Whether you use cash, checks, credit cards or debit cards, make a note of every purchase you make, even the twenty-five cent pack of gum. Also, track all of your income. This is just to make you aware of where your money goes each month.

*At the end of the month, put all of your expenses into categories, Fixed (the ones you pay every month like Rent, Utilities, Car Payment, etc) and Variable (the ones that change every month like Gas, Eating Out, Movies, etc.)

*Next, take a good look at where your money has gone. (Pay close attention to the Entertainment and Eating Out categories!) If you’re spending more than you earn, you’ll need to find ways to cut back on the variable expenses. If after cutting back on your variable expenses you find you are still paying out more than you earn, perhaps you’ll have to take more drastic measures like getting another part time job, moving to a less expensive home or selling a vehicle, for example. If you aren’t an over-spender, you might like to try to cut back on your expenses just so you can put a little extra in your savings account each month.

*Finally, make the necessary adjustments to your spending and put it on paper!! Housing should generally cost you less than 40% of your income. The Food and Auto categories should fall into about the 15% range. All other categories should run at about 3-5% of your income, but you should adjust it to fit your current needs and work toward whatever goals you have set for yourself. Don’t go over 100%, though!

These simple guidelines should help you begin your journey to financial freedom. Remember, if you take control of your money now and not spend so frivolously, then later, you’ll be debt free with lots of money in your savings account to buy what you want, when you want, free and clear. Whatever age you are or phase of life you’re in, it’s not too late to get started, so please, get on your way to financial freedom today!

One of the easiest ways to save money on food is by simply being organized. When making up a list of items to be purchased, I always go through the ads to see who has what on sale, and when. You’ll be amazed at how much you can save just by spending a little time looking at the Sunday ads, and seeing who has the best prices on items that you need. After making your list of stores to visit, set up a route and hit all of the stores in an orderly fashion purchasing the items on sale at each store. Don’t just look at the food stores either, but look at places like drug stores who often discount many food items as ‘loss leaders’ to draw people into their store. After a while, you’ll get a good feel for which stores have great deals on certain items, and when the items tend to go on sale. Another benefit of hitting several stores at a time is that you’ll spend less time running to the stores, and use less gas in the process, saving you more money.

Another easy way to save lots of money is by belonging to one of the Wholesale clubs like Costco or B.J.’s. Don’t let the idea of a membership fee keep you from belonging to at least one of these places because you’ll more than make up for it in savings. The problem many people have with these type of stores is the fact that you have to buy everything in such large quantities. While this may be an issue for items like meat and other perishable foods, you can definitely save lots of money by buying non-perishables like canned goods, paper items, and many other things that have a long shelf life. If you do a co-op with a family member or friend, you can even split the purchases and the cost.

Like many people, I used to have an aversion to clipping coupons. However, my attitude about coupon clipping changed one day when I watched a woman in front of me purchase a cart full of groceries for about $17. She was an expert at using coupons to save money. If you really want to get serious about saving money with coupons, you have to be organized and only clip coupons that you’re going to use. With the advent of the Internet, you can even print a lot of coupons online. A couple of sites that allow you to do this are coolsavings.com and coupons.com. Many stores also match manufacturers coupons, saving you twice as much on an item. While using coupons can save you a great deal of money, be aware of the prices of the items you’re purchasing and compare them with the other brands. Although large name brand manufacturers offer coupon discounts more often than local brands, the name brand prices can be much higher, negating much of your savings. Be smart and compare.

There are some other things you can do to save money while in the store. First, avoid impulse buying. Stores place certain higher profit items at strategic places in the store, increasing the likelihood of your purchasing them. Be aware of this, and keep your hands in your pockets. Also, leaving the kids at home while shopping for food will likely decrease your impulse purchases since few parents can long resist the screaming of children wanting everything they see. Also you’ll save a good bit of money by avoiding the junk or processed foods. These foods offer the most profit for stores and therefore are pushed at advertised overloaded consumers. Avoid the aisles that offer all of these ‘goodies’ and you’ll save lots of money and your waistline.

While there are few absolutes in life, the need for food and the likelihood of this commodity continuing to increase are about as certain as death and taxes. Since none of us live in the make believe world of government statistics, it’s a good idea to try and save a bit of money on this necessity whenever possible. Try implementing some of the tips mentioned here, and use your imagination to come up with some of your own.

Statistics show that most people could manage very well on the income they have now if they were able to keep their bills and expenses within their income. Sadly, too many people do not understand how to do this or how to recover once they have overextended themselves.

Personal Money Management is not a one step process. Simply having a budget in place or keeping up with your checking account isn’t enough. You need to follow a set process that covers several aspects of money management. Here are the basics of this process:

Set Your Goals

Most people think of setting goals as strictly long-term like retirement and college for the kids. While these are very important goals they are just the beginning. You need to decide what you and your family want your future to be and make all financial decisions with that in mind. This could include things like setting aside money for an annual vacation, replacing your car or home repairs.

Find Out Where You Stand Now

It’s absolutely necessary that you know what you have coming in and what you have going out. While a pre-set budget form is best to accomplish this you can do it on a piece of notebook paper. Just right down your bills and expenses in one column and your income in another. Then add them up and subtract your expenses from your income. You will know at a glace if you have money problems.

Develop A Budget You Can Live With

There are literally thousands of budget sample forms available and most are very effective. However, many have as many as 50 categories of expense items you must keep up with to make it work. This requires entirely too much time and effort and are usually abandoned within a few days or weeks. Find a simple budget with very few categories and once set up only requires your attention for a few minutes on payday.

Cut Expense In Every Budget Category You Can

There are thousands of ways to cut your expenses and not change the way you live. As an example, the current trend that is saving a lot of money is to eliminate your land line and use your cell phone as your primary phone. It’s a fact that most people could cut their monthly expenses by 10% or more leaving that money to be used for more important purposes. The internet is the best place to get tips that you can use.

Set Up A Debt Repayment Plan

Consumer debt is robbing people of hundreds of dollars each month in interest charges and late and over limit fees. Your goal should be to eliminate all of your debt as soon as possible. There is a simple process called snowballing that will allow you to pay off your debt much earlier and save you possible tens of thousands of dollars in interest charges.

Basically, snowballing is where you add up all of your minimum payments and choose one bill to add extra money to the payment until it is paid in full. Then you take the extra money and the payment you were making on bill 1 and add it to the next bill and so on. The extra money you add doesn’t have to be much. Just adding $25 will pay down your bills much faster because the amount of money you have allotted for bills remains the same until all of your bills are paid off.

Know Your Credit

Your credit rating, or credit score, is very important when obtaining a loan. As an example according to Myfico.com, show that for a $300, 000 loan, an individual with a credit score of 760-850 would pay $1745 and an individual with a credit score of 500-579 would pay $2676 per month.

The only way to really know what your credit looks like to lenders is to obtain a copy of your credit report regularly. Residents of the US can obtain a free copy of their credit report from the three credit reporting agencies each year. I urge you to get your free copies by visiting https://www.annualcreditreport.com/cra/index.jsp

Look For More Sources Of Income

If your paycheck doesn’t stretch far enough to cover all of your bills and expenses you may need to look for additional sources of money to cover everything. I would employ the expense cutting method mentioned above first but if you still can’t make it then more money would help.

Each of us have our own specific talents. Trying to come up with a one size fits all method of generating more income is next to impossible. But, if you take the time to really look at the talents you have you will probably find that you could use them to provide a product or service that people are willing to pay for.

Like I said, these are just the basics. There are other areas of personal finances that are just as important like investing and building your personal wealth, but those are topics that you can concentrate on when you have the basics covered.

If you aren’t aware of where you stand financially you may be a victim of what I call “Financial Complacency”. That is simply defined as not being willing to put in the time and effort necessary to control all aspects of your personal finances. Normally, this is a result of being confused about your money and how it should work because you were never taught the right way.

Simply by making a concerted effort to properly manage your money will go a long way toward solving any problems you may have. You may be surprised at how easy the solution can be.

Bar associations (attorney regulatory groups) in almost every state provide some great information to get you started. For example, good attorneys and debt counselors will tell you that, if you are in a serious debt situation, creditors and collection agencies can only contact you in the early stages. Eventually, these creditors must, by law, stop calling you on the telephone. From that point they will probably be contacting you by mail to let you know they are escalating the situation to include possible legal action.

This means that they may try to recoup some of the losses through either a collection agency arrangement or through a court-mandated settlement. Why is this important information? Because many times, people in debt will make quick emotional decisions that do not solve the problem at hand and which do not protect their own interests. These consumers often feel harassed and hurried by creditors and collection agencies to the point that they just want to end the phone calls and letters altogether, regardless of the consequences to their financial health. In reality though, this may be a good time to take a few deep breaths, talk with family or financial advisers you trust, and start using the tools of the debt system to work for you.

One of these tools that many people have neglected for years is the credit report. If you are in a situation that may require debt consolidation or debt management and counseling, it is imperative you have a full understanding of your credit history. Just knowing the facts contained on your credit report can be a great comfort when creditors and merchants start asking what you intend to do about your debt obligations. Credit reports are issued by credit-reporting agencies that get their information from your creditors. The reports are made available to other creditors, employers and landlords and to you upon request.

According to the California Bar Association, a “credit report includes such information as whether you pay your bills on time, have had a foreclosure, owe money as the result of a lawsuit or were convicted of a crime. Each piece of information stays in the report for a certain number of years. For example, a bankruptcy usually will be listed for 10 years.”

You may also want to consider a debt consolidation loan. A consolidation loan may be the answer to lowering your monthly payments overall, but high interest rates and long term agreements may mean that you end up paying more in total than with current agreements. So you should probably enter into a consolidation loan agreement after much discussion and careful study. A debt counseling agency or debt management plan may be another option. If you shop carefully and work with one that makes you feel comfortable, a counselor or professional manager may be able to handle your debt stress with a good plan.

Perhaps the best advice you can get when you are in debt and need help is, “don’t get in a hurry!” Experience has taught many of us that late-fees and back payments can be stopped when you undertake a serious debt management plan with a reputable counselor, manager or lender. Then, and only then, can you move forward with your life and “get out of debt” completely.