Surviving an economic recession – Survival tips
Just in case you might have been on an extended vacation in another galaxy or maybe you really do live under a rock, I thought I would let you know that it would seem we really are in an economic recession. The symptoms are all over and new symptoms seem to be appearing daily on the news: layoffs, declining markets, plant shutdowns, small businesses going under, and drastic corporate budget cut-backs.
Now that the recession is here and it appears that it intends to hang around for a bit, what should you do? Many people are asking this question and I’ve received quit a few emails with similar questions, so I thought I would share a article about what I think you should do and some things that you should consider in order to put the whole economic recession situation into perspective. I’ve written on surviving an economic recession before and my advice really hasn’t changed, but hopefully this article will provide similar advice with a little different perspective.
Economic Recessions are normal
First, let’s clear the air: Economic recessions are a normal part of the economic cycle. Looking back through history you can see that we’ve had 7 recessions since 1967. Granted, the one we are in is said to be the worst in US history, but regardless, recession are normal part of the ebb and flow of the US and world economies.
Personally, I believe there is a reason for everything and believe the reason for recessions is to remind people that they can’t live “high on the hog” all the time. For the past years to many people have lived on credit, borrowed off their future, purchased way to many things in order to keep up with the Joneses and overall just way over extended themselves. Now that the recession is here, what is happening? People are returning to good financial practices of saving, living on less than they earn and stopping the use of credit. I know this all from personal experience as I was living high on the hog for far too many years. Fortunately I began the process of getting control of my finances 2 years before the current recession kicked in.
Economic Recession Survival tips
Given the number of questions I’ve received and the buzz about the recession, I thought I’d share my personal tips for surviving the recession. I’d also suggest that these aren’t just tips you should use while in a recession, but tips you should practice all the time.
One of most critical things you can do right now is keep your job! I know this seems obvious, but I am constantly amazed at the number of people I work with and around that have made zero change in their work behavior. Let me cut to the chase, companies right now are looking to drastically cut back on expenses. The biggest and most effective way to do that is to cut people. Who will be cut? People that don’t perform and aren’t contributing to the bottom line.
Want to keep your job? The answer is simple: go above and beyond and keep you eyes open. Right now making your boss and management happy should be your number one priority, as those are the people that are going to influence who stays and who goes. Make sure you are contributing to saving your employer money. What does this mean exactly? Make sure you the value you are contributing to the company’s bottom line is far more than they are paying you. It’s simple and basic finances.
Make sure you are keeping your eyes open. I am constantly surprised by the number of poeple that walk into work one day, receive a pink slip and are surprised. Folks, you can see this kind of thing coming a mile away. Think your area might be impacted? Influence the decisions that will impact you. Talk to your manager and ask what you can do to reduce your risk. Look for other areas in your company that are hiring or that are needed and move over there.
The worst thing you can do is just sit still and have your career impacted by things out of your control. I prefer to control my own destiny.
Can’t find any good options within your company? Begin looking at other employees. Polish that resume and begin getting your resume in front of other people. While you might not be looking to make an immediate job change, just getting your name out there and maybe even doing some interviewing will make the whole process far easier if and when you do start to look. Plus, a little interviewing practice never hurts.
Diversify your income
One of the things I learned a few years back when I almost lost my job was that I would never again depend on one company to provide all of my income. Given the current job market and state of the economy it’s more important than ever to make sure you income is coming from multiple sources. Income should be diversified just like investments, that way when one income sources is impacted, others are still coming in.
Diversifying your income isn’t really to hard. Pinyo from Moolanomy shared more than 40 ideas for alternative streams of income. There are tons of great ideas on there. Another option is to find a part-time job working in the evenings or on the weekends. I diversify my income through blogging, blog consulting and coaching, through affiliate marketing, and through various niche stores I run online. I find running online businesses on the side allows me to work my own schedule, which with a large family is important to me. I literally make money while I sleep.
Am I rich from all of this side income? No far from it, BUT if I lost my primary job today I’d be able to pay my mortgage and put food on the table with the supplemental income I make. That alone helps me sleep better at night.
This is the most obvious one, and unfortunately the one I don’t see people doing near as much as they should be or could be right now. One of the golden rules of personal finance is to spend less than you earn, and that’s in good times. Right now, we should all be working to spend far less than we bring in. Does this mean we should stop spending or completely cut back? No. It does mean you should really think twice about your spending, live on a budget, and spend less than you earn.
Pump up the emergency fund
Generally I recommend an emergency fund of $1000 – $5000, depending on your needs and personal situation. Right now though, I think having a larger emergency fund is critical, especially if you are concerned about your job and feel you might not have it in the coming months. If you’ve been focusing on debt payments or investing, now might be a good time to cut back in those areas and begin building up the emergency fund a little in case times get a little tough for you. Of course once you have the emergency fund “pumped up”, you can return to paying on debt and investing.
What are you doing to survive the economic recession? What changes have you made to you finanaces? Share your perspective and story, add a comment!
Photo by: Ed Yourdon