Our Recession Recovery Plan

I have gone further into debt during the past year's recession due to loss of income from a client in my business. My plan to recover from last year's recession during 2011 is to pay off the debt as well as take a good chunk out of the debt we were carrying before the recession hit. In my opinion, the only way to prepare for the next recession, besides praying that it will never come, is to be debt-free and have a cash reserve available if the need should ever arise again.

Paying Off Our Line of Credit

A loss of one forth of our income, which roughly figures to be about $20,000, caught us unprepared. We did not have a cash reserve built up and met the crisis by using our available credit to meet unexpected expenditures. We own a small ranch in central New Mexico. One of the things we have in our favor is a $30,000 line of credit that we can use to help with expenses on the ranch. Currently, about half of the money was used during the recession. When we sell our calf crop in September, we should be able to pay off the balance and free up the $30,000 for an emergency fund.

Erasing Credit Card Debt

We also use three credit cards and ow a total of $5,000 on them. My priority is to get them paid off as rapidly as possible. We are currently surviving on my husband's income and anything I can make as a freelance writer. My goal is to pay off all three credit cards within four months by using our income tax return as well as economizing on expenditures such as groceries and eating out. Since I am now working out of my home full time, I can increase my savings by cooking rather than depending on more expensive quick-fix foods.

Building a Cash Reserve

Once the credit cards are paid off, I will work to build up a cash reserve that is not dependent on the $30,000 line of credit. The money that had been going to pay the credit cards will be diverted into a savings account to increase our cash reserves without changing our monthly budget.

With my husband being in the construction industry, it is feast or famine with his work. The ranch income is limited to an annual check when we sell our calves in the fall. My writing income has been slow to initiate, but has been growing steadily every month. While my husband is in a feast phase with his work, the focus and efforts will be the credit cards and creating a cash reserve.

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