Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
The following is a guest post by Charles Chua from All About Living With Life. Enjoy!
According to Investopedia, a double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession. The causes for a double-dip recession vary but often include a slowdown in the demand for goods and services because of layoffs and spending cutbacks from the previous downturn.
A double-dip (or even triple-dip) is a worst-case scenario. Fear that the economy will move back into a deeper and longer recession makes recovery even more difficult. A news item titled, “A recipe for economic disaster,” confirms that the stage is set not just for a double-dip recession but, worse yet, a depression and there are 10 signs the double-dip recession has begun.
What can you, as a normal citizen, do in such an adverse situation? I can think of the following ten ways to combat the worst-case scenario:
1. Hold tight to your job and be more productive: There will be more retrenchment as businesses contract. It is even more important for you to create extra value for what you can do. Show enthusiasm and work with your heart.
2. Start looking for a new source of income now: Is your spouse working? If not, can he or she contribute a new source of income? As jobs will be even harder to come by, rather than asking for help, just help yourself by starting a small business. As an example, if your spouse is good in pastry, he or she can start selling their delicious cookies, cakes, pies and muffins. The most important thing is to get started.
If you need some help coming up with ideas for a side-business, search around the Internet for a list of passive income ideas. In your search, keep in mind that with advances in communication technology that are available in today’s society such as online fax, Internet telephone, email, and teleconferencing, many jobs/businesses can even be run remotely from a home office.
3. Cut spending: Frugal living will be the key to hold out through this difficult period which is looming in the horizon.
4. Avoid getting into more debt: The wise move is to get rid of all debt and stay debt-free. Forget about what you want, just live with what you have and be happy.
5. Continue to learn and be more skillful: This is even more critical at this stage to update your skills and learn new things which are useful at your workplace. To be up-to-date is to be competent.
6. Stay positive: Do not allow the negative events to erode your positive mindset. Be sure of yourself, be confident, and most of all, be resilient. You will surely see the light at the end of the tunnel.
7. Stay healthy and fit: Stay calm, alert, and collected by staying fit and healthy. Exercise daily to cope with life’s adversities with energy and resolve.
8. Networking: Do not neglect to stay in touch with your circle of friends. You never know when you will need their help. On the other hand, do what you can when one of your friends is in distress.
9. Hold on to your investment in gold: You are lucky when part of your investment is in gold. Stocks and shares will suffer, but the real value of gold remains unaffected. In fact it gets better. You can count on your gold when it is necessary to turn it into hard cash.
10. Be alert to changes that are taking place around you: Stay in the know and react quickly before things get worse. Subscribe to Google Alerts on topics relevant to you and be notified as soon as it happens.
How about you all? What other effective behaviors do you try to focus on during tough economic times?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- @ Labeling time periods as a recession, a depression, etc –
- This is a very interesting post Charles! Thanks for sharing!
- Personally, I find it incredibly entertaining how utterly useless economists are in their ability to predict depressions and recessions.
- I once read that the top economists in the world can only accurately announce when a recession starts ONCE IT HAS ALREADY STARTED! Talk about ridiculous!
- Additionally, I feel that all too often, people let the fact that the media has labeled the current time period as a “recession” influence their decisions too much. This is especially true when it comes to buying and selling of investments.
- @ Starting a small business for a second source of income –
- While I do agree that a family finding a second source of income is beneficial during tough economic times, I do not feel that a small business is the best way to do this.
- Why do I feel this way? Simple. It’s a well-known fact that a large majority (I think I’ve heard 90%) of small business fail during their first year of operation. As such, the odds are not in someone’s favor to succeed in making short-term profits in a small business, particularly if the person is already hurting for money in a recession.
- Instead, a more sure way of getting crucial additional income in a recession is to simply take up a side/part-time job.
- However, it might also be prudent to start thinking of creating your side business, but to make it a more long-term goal.
- @ Several other ideas I had for effective things you can do in a double-dip recession – Aside from the ideas listed above, I could think of several other important things I try to do during tough economic times.
- Regarding investments, first and most importantly, it’s crucial to not give in to all of the “hype” and panic sweeping around the market. During the 2008-2009 market downturn/recession, I saw all too many individuals sell a majority of their stock holdings very near the market bottom. And, what do you know?! I talk to them recently, and they have since bought back in to the market. These people are doing EXACTLY the opposite of what you should be doing to create long term wealth in that they are selling at the bottom and buying at the top.
- So, the bottom line is that during a double-dip recession, be sure to keep an eye out for buying opportunities when the market is low and maintain your appropriate target asset allocation through periodic rebalancing.
- During a double-dip recession, it’s also important (as Charles mentioned) to continue learning new skills. To this advice, I will add that it is good to start learning additional skills that can be directly related to increasing your company’s bottom line. Since jobs these days are very specialized, in order to do this, you may have to reach out to different departments than the one you work in and be willing to work after-hours.
- For example, let’s say that your normal job is working on the manufacturing floor facilitating the release of product. In this case, you could reach out to the supply or sales department of your company and see if you could help out in some way helping them break in to new sales markets. At the very least, your company will be impressed with the initiative you’ve shown, even if they don’t allow you to help out in multiple areas. If you’re going to do this, always be sure to get prior-approval from your boss before approaching another department.
- While this process of reaching out to new areas may be slightly painful, I believe it will pay off in the long run.
- @ Investing in gold –
- While gold is probably a good investment to have going in to a recession, prices of this commodity/asset will increase during a recession due to increased demand because of the security it provides.
- Therefore, it’s important to not give in to the “gold buying hype” during a recession because this will most likely only cause you to lose money in the long term.
***Photo courtesy of http://www.flickr.com/photos/aturkus/139818702/sizes/l/in/photostream/