On Surviving A Personal Financial Crisis - And Other Personal Finance Subjects Like Loans, Credit, Debt, Debt Management, And Saving Money

Recessions come and go they are as much a part of the business and economic cycle as breathing is a part of life. Preparing for a recession is as just a fact of life as a recession is a part of the business cycle. But, there is a difference between surviving a recession and prosperously surviving a recession. If you are like me, then you probably do not plan for surviving a recession, you just take the economic and financial times as they come.

People that plan for surviving a recession are able to go beyond just surviving a recession and are actually able to prosper during a recession. But, let’s say you haven’t planned for surviving a recession and now the economy has slowed and all the pundits are pointing to the possibility of there being a recession. What do you do? How do you go about thinking about planning for surviving a recession? There are two basic strategies you should take when thinking about how you are going to go about surviving a recession; increase your income or decrease your monthly expenses.

Two Strategies For Surviving A Recession

Now both of these strategies may seem like common sense. But, we are only human. And as humans we tend to think that things will never change. This is true in both bad times and in good times. In bad times we all tighten our belts, make due with less. We watch how we are spending our money. We tend to think about how spending money today will affect us in the future. We do this because, although we may hope that good times are right around the corner, we tend to believe that the future will be just like today. For example, if you were lucky enough to be able to buy a house during bad times, you would not agree to a mortgage where paying it off depends heavily on the value of the home increasing.

We wouldn’t agree to loans that have adjustable rates, much less other more exotic financial agreements that most people do not understand. We would not agree to these things because in bad times we are more financially conservative. We simply as a matter of course assume that things will be bad in the future and plan for those bad times out of necessity and habit. If we had this mentality in both good times and bad times, surviving a recession would not be a difficult or scary prospect. We would have those emergency reserves that would help us weather the storm. We would have the necessary mentality to think about our financial future.

Just the opposite is how we think during good economic times. During good economic times we tend to believe that the good times will never end. We tend to think that jobs will be easy to get. Moreover, we get used to the idea that any job we have will pay well. Because we think that jobs are easy to get we tend to slack and not be as competitive an employee as we should. What I mean by competitive is that we tend to become complacent and not expand or master new skill sets and thereby becoming more valuable to our employers. Because we make enough money to cover our current day to day expenses and saving for retirement we tend to not be as entrepreneurial as maybe someone that does not currently make enough money to cover day to day expenses and retirement. We are simply less motivated to do better financially.

Surviving A Recession By Reducing Expenses

So although reducing expenses and increasing income may seem like common sense solutions for surviving a recession, we tend to not take them seriously until after it is too late. How do you go about planning on surviving a recession? Right now, while you are making enough money to cover your bills, sit down and take a good long look at your expenses. Spend the money on some basic accounting software like Quicken. Use as much information about your expenses as you possibly can. The more information you have the accurate a picture you will be able to build. Now, sit down and be honest with yourself. Do you really need to go out to eat two or three times a week? Do you really need to spend the money you are spending? The sooner you are honest with yourself about not really needing to spend one hundred dollars a week on new clothes or whatever it may be the fast you will come closer to being able to actually planning for surviving a recession. For this to work you have to be honest with yourself about what is actually financially necessary to live.

Surviving A Recession By Increasing Income

On the other side learn how to increase your income. If you are barely making ends meat and you think that there is a possible recession looming, then surviving a recession means increasing your income. If you are not willing to cut expenses as a strategy for surviving a recession then you better be willing to make more money as a way for surviving a recession. Figure out how you are going to make more money now, before the full force of the recession hits you. That way you are able to have a good piece of mind that you have that extra income to help you in surviving a recession if it is needed. If you take this tactic soon enough you may be able to use the extra income to pay down debt. That way you reduce your monthly expenses and do not require as much money on day to day basis just to live.

I can hear you now grumbling under your breath. How am I supposed to increase my income? There are a million different ways to increase you income. I would start with hobbies and work out from there. It does not matter how you finally decide to make extra money. What matters is that you start looking for that way now. Do it now. If you start the process after you begin to feel the affects of a recession then it will be much harder.

Two Basic Strategies For Surviving A recession Conclusion

Planning on surviving a recession by reducing expenses and increasing income takes intuitiveness and tenacity. But, if you undertake either strategy for surviving a recession then you will be in a much better place. Do not wait for you or your loved one to become unemployed. If you both cut expenses and increase your income as your strategy for surviving a recession then you will be in a fantastic position for prospering in a recession not just surviving a recession.