How to Be Prepared for an Economic Downturn or Recession

The slowing economy, which began with the collapse of the housing market, could be the beginning of a trend in which things get worse before they get better. If the gross domestic product declines for two or more consecutive quarters, we will be experiencing a recession and life will be less prosperous as companies cut costs to keep their profits as high as possible. These cost-cutting efforts often include layoffs. There are several things you can do to anticipate the concerns that are likely to result from a recession.

Instructions

Difficulty: Moderate

1. Look at how you are spending your money. Cut back on non-essential items and postpone major purchases.
2. Pay off or pay down any debt. Reduce credit card balances. Try to pay more than the minimum monthly payment.
3. If you are contributing more than your employer match to your 401K and the money is not immediately accessible to you, consider putting some of that money into savings.
4. Try to protect your job by making yourself invaluable to your boss. Don't wait to be laid off to seek alternative job opportunities.
5. Be sure that your investment portfolio is diversified for the long term.
6. Consider increasing the deductibles on your car and home insurance to save money on premiums.
7. Try to save enough money to cover three to six months of expenses in the event you lose your job.

Tips & Warnings

• It's hard to reduce housing and transportation costs, but food bills can be reduced. Eat out less, skip the expensive latté and carry your lunch to work instead of eating out.