Get in Survival Mode for Looming Recession


Federal Reserve Chairman Ben Bernanke has warned Congress about a recession if the government doesn't intervene. But what's in a name? The economy keeps shedding jobs, the credit markets are seizing up and the stock market keeps heading south despite brief, half-hearted rallies. Even if we haven't had two consecutive quarters of contracting GDP -- the definition of a recession -- the economy is acting like it's in a recession. Here are a few things you can do to make it through to the other side.

Don't panic

That is easier said than done when the Dow dropped 777 points on Monday, and the S&P 500 is down about 20% since the start of the year. But as bad as things might look right now, the economy typically recovers from such deep declines. Unless you need investment money to cover short-term expenses like medical bills or mortgage payments, your best bet is to ride out the downturn. Try turning off the scrolling stock ticker on your homepage and tune out the background noise. When you are investing for the long term, short-term ups and downs can only cause you stress.

Keep investing

It can be hard to keep investing in your 401(k) or IRA when you open your quarterly statement and see lots of red ink. Try changing your frame of reference: Think of your regular contributions to these accounts as buying shares rather than investing money. Even if the market continues to slide over the next few months, when the recovery comes, the shares that you buy now will end up being worth much more.

Timing the market is next to impossible, even for the experts. If you stuff your cash under your mattress rather than continuing to invest in retirement plans, you risk missing the rebound and short-changing your long-term retirement goals. Talk to an adviser

As much as you need to tune out the hysteria on Wall Street, you may want to make sure you are set up appropriately to weather the storm. When was the last time you rebalanced your investment portfolio? If the answer is more than a year, check in on your asset allocation to make sure your portfolio still reflects your long-term investing goals. Consider meeting with a financial adviser to make sure you've covered all the bases. To find a fee-based adviser near you, check out the National Association of Personal Financial Advisors.

Work harder

As companies struggle in a recession, they often trim their workforces in order to improve the bottom line. You can help protect yourself in the next round of layoffs by putting in a little extra effort at work. It's survival of the fittest out there, and even though there's no foolproof way to prevent yourself from being handed a pink slip, you need to do everything possible to improve your odds.

That said, consider polishing up your resume and kicking your networking up a notch. There's no sense in getting caught flat footed if the unthinkable happens.

Pay down debt

Nothing drags down your cash flow more quickly than paying interest on a bunch of expensive debt. Pay down your high-interest debt by any means necessary. And once those balances hit zero, don't use your credit cards except in an emergency. The invention of credit was one of the things that contributed to the Great Depression, and growing consumer debt has helped put us where we are today. As for things like mortgages and home equity loans, consider refinancing to take advantage of lower rates. And think twice about opening up any new loans: Ask yourself if you really need to spend that extra money now or if you could wait another six months or a year.

Reduce your footprint

Environmental benefits aside, reducing your carbon footprint can also save money. Try renting instead of buying any expensive items, like a leaf blower, video camera, skis or snowblower, which you may only use once a year or occasionally. And try fixing things like a lamp, a lawnmower, or many of your home electronics instead of buying something new to replace it.

When it comes to finding space in your budget, you can even look outside the box. October may not be the right time to convert your front lawn into a vegetable garden, but instead consider growing herbs indoors or do your own canning of local produce. If you are lucky enough to live in apple country, you can store some varieties all the way through winter.

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