Recession Survival Guide


says Karl, a self-employed business consultant, about the 2,300-square-foot, double-brick structure. The main house is hardly shabby either with five bedrooms, a gourmet chef’s kitchen, and saltwater pool.

Having moved into the home in early March, the Douglasses are about to start the conversion of the garage into a two-bedroom home for Karl’s parents. They are finding another perk of the depressed real estate market: Contractors are readily available and willing to throw in higher-quality finishes to sweeten the deal. “These contractors are literally sitting at home waiting by their phones for us to call and tell them to start,” Tonya says.

BUDGET
Even if you aren’t feeling real financial pressure at the moment, you should still be tightening your belt. Two reasons: First, it’s still too early to tell whether job losses will be contained to the housing and financial sectors or whether they’ll eventually become more widespread. Second, raises aren’t likely to be as plentiful as before, yet inflation, at 4% a year, is ticking higher. So you’ll feel poorer.

“If there’s anything uncertain about your employment, you want to make sure your budget is as lean as it can be,” says Gwendolyn V. Kirkland, certified financial planner with Kirkland, Turnbo & Associates in Matteson, Illinois.

The cash cache: The usual rule of thumb of saving three to six months of living expenses doesn’t apply to these uncertain times. Finding a job in the middle of a recession could take longer than normal. So Kirkland advises a year’s cash horde. “It doesn’t necessarily have to be in cash, it could be a cash equivalent, something where you won’t incur penalties if you must access the money,” she says. If you can’t find the money to build up your kitty, consider Kirkland’s ideas: Take a part-time job, turn a skill into an income stream, or sell your used clothing at a consignment shop. But don’t even think about raiding your retirement account if you come up short. You’ll have to pay penalties and taxes and will set you back financially.

Necessary vs. discretionary: Remember when a cell phone was a luxury? It’s almost more necessary than breathing to some people. If you can’t give up your mobile, look for other places to trim some fat. For example, are you paying for a gym membership you don’t use? Buy a pair of good running shoes instead and hit the pavement.

Pay down debt: Households with credit card debt spend 21% of their income servicing that debt. If your income isn’t rising, but your debt is, more and more of your money will be eaten up by debt. Try to pay down as much of it as you can. “If you’re disciplined and own your own home, under certain circumstances, I’d recommend that you refinance and pay off your debt,” says Dwight Raiford, senior financial planner with MetLife in New York City. But, there’s a caveat, he adds: “Then you have to take scissors to your credit cards and cut them up.”

You might be tempted to not


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