Surviving Your Recession

“Poverty and shame come to him who refuses discipline, but he who heeds correction shall be honored.” Proverbs 13:18 WEB

You have heard it over and over again but do you really know what it? It is on the lips of everyone, your coworkers, newscasters, economists, politicians, and even your preacher but what is it?

In fact forty-five percent of the National Association of Business Economist now feel that the U.S. economy is headed for a recession but what is a recession?

A recession is simply a period of general economic slow down measured by a decline in the “Gross Domestic Product” (GDP) for two or more consecutive quarters and continuing for at least six months. With Gross Domestic Product being the value of all the goods produced in this country. It not only includes goods and services made and provided by Americans, but goods and services produced by foreign firms within the borders of the United States. A little different from Gross National Product (GNP), another widely used economic indicator. As the Gross National Product does not include goods and services produced by foreign producers, but does include goods and services produced by U.S. firms operating in foreign countries.

And a recession is characterized by a number of different trends, including:n n 1.Loss of consumer confidence resulting in people buying less n 2.Decrease in factory production n 3.Growing unemployment n 4.Decline in personal income n 5.Volatile and declining financial markets

The surprising thing though is what actually triggers a recession; it is actually the result of millions of people's actions- you the consumer losing confidence and then displaying your lack of confidence by buying less. Causing a rippling effect across the economy in production, employment and financial markets.

And you understanding this definition of a recession is the key to helping you make sound financial decisions in what for others could be depressing and trying times. So here are my suggestions for overcoming a recession.

First, determine whether you are personally experiencing this phenomenon. The key question to ask is whether your income has been declining? The mistake most persons make is to look at the current dollar value of their paycheck without giving consideration to the actual buying power of their dollar. You have heard and seen the decline in the value and ultimately the buying power of the dollar over the past few months - that change is called inflation.

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, your purchasing power is falling. As inflation rises, your dollar will buy fewer goods, if the inflation rate is 3%, then a $1.00 pack of gum will cost $1.03 in a year.

If your income grew less than six percent last year then you are in recession, why because inflation is running around three percent and a recession occurs when real income growth is less than 3 percent (a combination of the two numbers indicate that you will need to grow your income by at least six percent).

To change this you need to:

1.Widen your streams of income. Your income should not be limited to just your paycheck but should also include passive income flows represented by profits from a business operation or investments. The more diverse your streams of income the better able you are to weather economic changes.

2.Invest in yourself. Your personal development is one of the most important investments you can make during a recession. You must ensure that you have the skills that makes you not only an asset to your organization during these tough economic times but also increases your marketability.

Secondly, you must evaluate and take control of your finances. The five best ways to do this are:

1.Reduce Expenses. Tough times are the best times to evaluate your spending habits o determine whether you are making the best use of your valuable resources. And the key to doing this is to track your spending for a period of thirty days, recording how you spend every penny. This simple exercise will not only surprise you but will help you to ensure that you are spending your money the way you intend to.

2. Reduce Debt. Pay down and get rid of all consumer loans. Your previous jou
alizing of your spending will give you the ability to accelerate your payments with the extra money you have found.

3.Stop Borrowing. You should purchase only what you could afford to buy with cash. Only use your credit card if you can pay off the purchase when the bill arrives. Remember that credit robs you of future dollars as they are being used to pay for today’s consumption.

4.Focus on increasing savings. If you are not saving at least twenty percent of your income now is the time to start. Apart from requiring you to pay your tithes and offering God also give us a critical example in the story of Joseph of how to over come tough times - Saving 20% during good times.

5. Look for growth opportunities. No other period of man’s history has enable him to empower himself financial like recessions. And with discipline you can do the same.

There is no question that life is cyclical and that you will have your ups and downs but if you are disciplined and diligent you will survive your recession!

“The soul of the sluggard desires, and has nothing, but the desire of the diligent shall be fully satisfied.” Proverbs 13:4 WEB