Preparing for the End of the Recession

There are many definitions of a recession. According to the Federal Reserve Board (the Fed), we have come out of recession and are not quite back in another one. However, there is no doubt that we are in a de facto recession- an economy with high unemployment, tight credit markets and a housing crisis. Most families are feeling the pain of this recession. In my consulting practice, I am fielding questions about when it will end and what people should do in the meantime. No one knows for certain when the economy will begin to ease but there are several things that you can do to be in great financial shape when it does:

Make payments on time

Your credit rating is one of your most valuable personal assets and protecting it during economic downturns is important. You may not be able to refinance your home or obtain new debt right now, but keeping your credit score high will ensure that you can when the economy turns around. Late payments can impact your credit score significantly so be sure to jot down due dates and make your payments on time.

Keep your debt under 70%

Another determiner of credit scores is the percentage of debt you have compared to the total debt you have available. For example, if you have a $10,000 limit on your credit card and have it maxed out, your score will be lower than if you had the same $10,000 limit and had a balance of only $4,000. If you have lots of available credit, the score takes that as meaning that you can manage it wisely. Try to keep your balances on credit cards and other revolving loans below 70% of the total available balance to keep your score high.

Correct errors in your credit report

Federal law allows you to request a free copy of your credit report from the three major credit bureaus annually. Request a copy and review it in detail. Make sure that you know what every item is and that its balance and payment history is correct. Sometimes, credit items for other people could end up on your credit report, impacting your score incorrectly. Each of the three bureaus has a process where you can report errors and have them corrected. If it is a payment history you are disputing, be sure to gather all documents related to your contention to prove your case.

Build a safety net

Keeping your credit under control is important to your net wealth but having a safety net in place will help you weather the rest of the recession. Tuck some money away with every paycheck into a savings account so that you can draw on it rather than requiring new credit if unexpected expenses arise. Once the whole economy is back on its feet, you can increase this savings component to have a long term source of emergency funds.

Stay up-to-date at work

There may not be many job opportunities in your field in the current economy, but when it turns around, you may find a new boom of advancement choices. The best way to position yourself for them is to keep your training and education in your field up-to-date now. Take employer-sponsored training courses and any other learning opportunities that come your way. If you want to switch industries or climb in your current one, assess what kind of education you would need to do that and start now. You'll be head and shoulders above the competition by the time the recession is over.

More From This Contributor:

Getting Out of Debt in 2011

5 Money-Saving Ideas You Can Use Today

Dealing With Overdue Hospital Debt