I think that a lot of us who suffered through the most recent recession probably don’t really feel like that particular economic downturn ever ended. Sure, the stock market is up, and the housing market – at least in certain areas – seems to be doing better, but overall, things may not appear all that rosy.
In their article, “Why another recession may be inevitable”, MSN Money sited Albert Edwards, “Societe Generale’s uber-bearish strategist” as stating, “”U.S. profits have begun to decline on a MSCI trailing basis,” he said in research note released on Tuesday. “A decline in profits is inevitably followed by recession shortly thereafter, as investment, the most volatile of all GDP (gross domestic product) components, is cut.””
If this is the case though, our family is ready.
Maintaining a recessionary lifestyle
We made certain adjustments in our lifestyle during the most recent recession. We downsized our home, selling at a loss, but repurchasing a smaller home outright to eliminate the cost of a monthly mortgage. We took time to learn how to create some of our favorite meals out ourselves at home, slashing our dining out budget. And we began to do a lot more shopping at resale and discount stores, maximizing our dollars when it came to things like clothing and groceries. Even once the recession supposedly ended, rather than revert to our old ways, we’ve kept such money-saving tactics in place, making it easier to maintain the status quo when the next recession hits.
My wife and I each have jobs that provide us with a main source of income, but lately we’ve been working at diversifying our income. While we haven’t built huge side incomes, in a recessionary environment, even little amounts can help cover costs and make for a less financially painful experience.
In the past recession, we explored area resale options – light used resale stores and consignment shops – that helped us make some extra money off many of the items we were getting rid of during our downsizing. This was especially helpful for lightly used or unused baby items and kid clothing and toys. Then we expanded our efforts to hitting area garage and estate sales, looking for items we could resell in such environments, and now we’re taking our efforts into the online realm, selling through eBay. In these ways, we pad our finances and better protect against recessionary financial pressures.
After the recession, many investors may have jumped headlong back into the stock market, potentially taking on more risk in the process. While this risk may have paid off in the short term, it’s not something we personally chose to do with our assets. Therefore, we left many of our existing investment funds within our retirement accounts in place. So while we haven’t recognized huge returns as the market recovered, we’ve retained stable assets classes that have grown throughout the recovery. We’ve stuck to what we know, and we kept much of our retirement assets in stable, diversified, dividend-paying funds that we feel comfortable with and that have a preferred risk level that matches our investing style.
We know how these funds reacted during the last recession, and we are therefore prepared should we encounter another, hoping there won’t be any surprises in the process. And in these ways, we hope we’re ready if or when the next recession roles around.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.