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In times of economic turmoil, everyone’s minds turn to adages and words of wisdom from parents and grandparents. In fact, most of their insights came from surviving one of the darkest financial days in history, The Great Depression. The Depression made such a lasting impression on them they never abandoned the lessons learned. Those same lessons on recession are still valid today.
First, in the good times, always put away something for a rainy day. Having a reserve fund will ensure that whatever comes, you are prepared. In fact, conventional sources suggest you need to have a reserve fund equal to six months of expenses in case you lose your job or get laid off. Your reserve supplies ready money and does not dry up like other sources in an economic downturn.
Ways to beat a recession
Our grandparents did not buy things they did not need, with money they did not have. Theirs was a clear understanding between wants and needs. When they married they worked and saved to buy a house, car, or even clothes, and never liked to borrow money. Today, the rush for immediate gratification means newlyweds insist on getting everything they want upfront, and then suffer through years of paying monthly payments with high interest.
Wonder what our grandparents would think of our paying 29.9% percent interest on a credit card?
In a tough economy, everyone must make lifestyle changes. Only those who are smart about cutting back will survive a recession. It isn’t just the middle class that needs to cut back either. Those who are used to a lifestyle complete with personal shoppers, personal chefs, and chauffeurs may need to learn to shop alone, cook, and drive their cars.
These measures need to be taken both to save money and to learn how to live with less, should financial hardship become a reality.
For those who don’t have chauffeurs and personal shoppers, what can be done to cut back? Carpooling to save money on gas, rented movies instead of the theatre (or better yet, library rentals), and cutting back on telephone, electricity, internet, water, and gas bills are all things that you can do now. A lot of small sacrifices add up to a whole lot of savings.
Then, it is also a good idea to have several streams of income. While granddad went off to work at the sawmill or cotton mill, grandma often made extra money by selling eggs, milk, produce, or even quilts, made at the home quilting frames. Granddad often raised and sold hogs or cows.
They did not depend on one job to make ends meet. Today, even if you have a good job, it is not a bad idea to have other sources of income. Conventional wisdom suggests that in today’s economy if you are not planning for your next job, you are behind. Go back to school part-time, learn a new skill, and find something you enjoy that could become a second source of income.
During tough economic times, many must also look into secondary income sources such as moonlighting or self-employment. Above all else, it is essential not to become dependent on a single source of income, be it from a job or a business.
Spreading your income sources over several baskets is less risky should one of those sources cease to make money for you. Be careful when working extended hours at multiple jobs; your health will suffer if you do not continue to eat regular meals and exercise. Poor health equals more doctor’s bills so it makes sense to be proactive.
Just Starting Out
The middle of a recession is a terrible time to be graduating from college and looking for work. Recent graduates and young people just starting can quickly become discouraged when the only job prospects are those several rungs beneath their qualifications. Many of these graduates have burdened themselves with student loans that they are unable to pay back and even more are putting off further studies in favor of working to pay off the loans already accrued.
What can a recent graduate or job-searcher due to improving prospects in a tight economy?
Research market trends and determine which sectors of employment are increasing or likely to remain strong. Fields such as education and healthcare may be less volatile than business pursuits during a recession. Although, taking a job that you are overqualified for may seem like a bad move, getting your foot in the door in an organization in which there is potential for advancement is usually worth paying your dues initially.
The most important thing to remember during a recession is that there are people who are still doing well and thriving. Discover who those people are and what they are doing. There is only so much cost-cutting that you can do before you need to find a way to increase income. Know that it is still possible to grow wealth and seek it out.
Don’t put all your eggs in one basket was a favorite piece of advice. The recent financial meltdown has made the wisdom of this statement all the more pertinent. Diversification of assets is one of the first rules of investment. Amazingly, success leads to a false sense of security. How many historical examples could be sighted to prove the folly of such thinking?
Guard your credit because it reflects on your reputation. The previous generation had high standards and their word was their bond. When they promised to pay something, they never considered bankruptcy as a way to get out from under the debt.
A final lesson we can learn from the past is to take a long term view of problems. We live such short term lives in this generation with immediate gratification, and the present taking most of our effort and robbing us of thinking about the future. The best response in the good times and bad is to take a long-range view. The present troubles will come to pass and things will improve, and when the good times return we need to live according to the principles we learn in the hard times.
Change must come for each of us if we are to make our lives recession-proof and avoid future problems.