13.3.08

Recession and unemployment: Makes no difference to me

Below you will find an article which gives out tips on surviving a recession. Whether you are in the U.S. or somewhere else, recession or recession like existence is palpable and is almost with us if not already there.

I must confess, since three years ago, I have been on my own “personal recession”. Coping with semi-retirement because of an illness was something I had to deal with, mostly on my own. Friends and former co-workers were busy, my family had their own individual concerns. Being alone helped me once again test my mettle against this temporary financial setback.

Wherever and whenever applicable, I had the chance to use in more ways than one, the tips similar to those offered by the author. The fact is, my situation is a work in progress :-)

Tips for surviving a recession
By : Kathleen Pender

Face it. The odds of a recession have grown. That's why the Fed slashed interest rates this week and why President Bush and Congress are eager to get checks into the hands of consumers.

What should you do to prepare for a recession?

"Two things you don't want to do is buy a second house and figure out how to sell the current one later or quit your job and figure out how to get another one later," says Jeff Lancaster, a principal with money management firm Bingham, Osborn & Scarborough.

Many experts say the housing and job markets are likely to get worse before they get better. That's because economic stimuli generally take six to 18 months to have an impact.

Recessions aren't officially recognized until months or years after they happen, but some economists say one has begun. David Rosenberg of Merrill Lynch notes in a report that the four factors the National Bureau of Economic Research uses to gauge recessions - employment, real personal income, industrial production, and real manufacturing and retail sales - all peaked in November or December, suggesting we entered one in January.

Rosenberg expects home prices will decline 15 percent in 2008 and 10 percent more in 2009. He predicts that unemployment - which jumped to 5 percent in December from 4.7 percent in November - will hit 5.75 percent by year end and 6 percent by early 2009.

Rosenberg is more bearish than most. A Bloomberg survey of 35 economists published Jan. 9 put the odds of a recession at 40 percent. But if you would rather be safe than sorry, here are some ways to batten down the hatches:

-- Assess your job situation. In a recession, no one is immune from layoffs. Today, anyone in housing, real estate or finance is especially vulnerable.

People who depend on sales commissions - particularly on consumer nondurables such as cars or appliances - could see their incomes pinched, says Bill Gustafson, senior director of the Center for Financial Responsibility at Texas Tech University.

If you're worried about your job, consider investigating or training for a new career.

-- Build an emergency fund. You should have at least three to six months' of living expenses in a safe place such as a money market fund or savings account. If you don't, here are some ways to build an emergency fund:

Pare spending on nonessentials such as cable TV, restaurants and entertainment.

Increase your income by working more hours or getting a second job.

Clean out your closets. "I have a friend who just lost her job. She is having a ball selling a whole bunch of stuff on eBay, everything from a gold Cartier watch to smaller things," says Kit Yarrow a marketing and psychology professor at Golden Gate University.

Continue contributing enough to your retirement plan to get the full employer match, but consider putting any extra savings in your emergency fund until it is sufficient.

Contribute any check you might get from Uncle Sam to your emergency fund.

Her full story here.