Essentials of Surviving a Double-Dip Recession

Forecasters from the Economic Cycle Research Institute have now stated unequivocally that the United States Economy is bound for a second round of recession, commonly called a double-dip recession. This indicates a period of economic instability following a brief upswing in economic indicators during which time spending falls, consumer confidence wanes, and there is little or no investing going on on Wall Street. Whatever the reasons for the current situation, whoever you choose to blame, one thing is clear. Most people are going to have to significantly change up their routine in order to get by.

A recent survey by CNN showed that as many as 90% of survey respondents believe that the economy is in very poor shape.

If there ever was a time for preparing yourself for the possibility of a further economic downturn, than this certainly is it. Fortunately, there are a few things you can do to help you and your family weather the downturn. Additionally, you can use this time to help build up your savings portfolio as long as you have enough liquid assets to do so. Mind you, this isn't the time to panic and sell everything. It is, however, time to develop a strategy.

Savings

Begin adding as much additional cash as you can to your savings account. Cutting back on discretionary spending such as movies, eating out and hobbies needs to be of paramount importance for the time being. You might be surprised just how much savings you can build up in a relatively short time when you skip the doughnut and latte in the morning in favor of plain coffee.

Around the House

Opt for store-brand products as opposed to name brands. In many cases, store brands are produced by the same companies that the name-brand products are produced by. In addition, limit what you spend on non-essential goods like candy and soda, opting instead for basic, nutritional meals that you can prepare easily at home. Use coupons whenever possible and take advantage of sales at your local stores to stock up on non-perishable items like sugar and canned items.

Reduce your spending on energy consumption, particularly during the coming winter, by wearing sweaters and avoiding turning up your furnace too high. When driving, save fuel by cleaning out your car to save weight and only drive when you really need to. It helps tremendously to adhere to what is called "hypermiling." Calculate your total savings, and then add as much of this as you can to your savings.

Investing

The most important factor to consider when investing during a down economy is how much you need in liquid assets to get through the downturn. Additionally, if your investments are currently up, you may want to consider selling while you can. During a down economy, stock prices will dip as consumer confidence wanes and people stop spending money. However, if your stock has not become volatile, and seems to be holding steady, you'll want to leave it alone. When the economy turns back around again, stocks will begin to rise again. Additionally, you will still be able to take advantage of any dividends that your stock provides.

When investing during a recession, take special note of what is happening around you. Think about what people do during the recession, and where they shop. People need to eat, they need clothing. The only question you need to answer for yourself is where are they likely to do these things?

At Work

Economic downturns often leave people laid off as companies try to maintain their bottom line. The owners of the company may be sympathetic to their worker's plight, and they yet may not. The best thing you can do during such a time is to avoid making waves. In most cases, if they can't see you, they won't cut you. Obviously, that isn't always going to be the case. If you do end up with a layoff, try not to take it personally. You might just find that there are more opportunities out there than you think. Cut back on your expenses at home, and then take stock of your abilities and skills. Make a list of everything you're good at, and then think about what you might do along those lines. Of course, even people with relatively few skills can still get by. Can you chop firewood? Restore furniture? Fix leaky pipes? Look at the downturn as an opportunity to grow yourself, and you'll be much more likely to get through the tough times intact. You just might find a part of yourself that is far better at running your own small business than answering to your boss, anyway.

Sources:
SFGate.com: "Tips for Surviving a Recession"; Kathleen Pender: http://articles.sfgate.com/2008-01-24/business/17148456_1_retail-sales-new-career-job

Allbusiness.com: "Can Your Personal Finances Survive a Recession?"; Miranda Marquit: http://www.allbusiness.com/banking-finance/personal-finance-personal-debt/4974275-1.html