So, how do we prepare for a recession? Save more in the EF? Cut back spending?
I have a pretty secure Gov't job. Expect a raise in JAN, 3.9% COLA plus something else based on performance (I may owe them money).
Having grown up in a town that was hit hard by the recession in the early eighties, here are the "lessons" ingrained in my grade-school brain:
1. Job security trumps all, but is especially important for those with little savings. I didn't realize there were hard times in our town until classmates' seats showed up empty for weeks and intense questioning of our teacher finally resulted in truth: They'd moved because mommy/daddy/both had lost their jobs. Sometimes being laid off can't be avoided, but learning an indispensable skill in your job helps make you valuable to your company.
2. Living lean buys you time. If you've got slim savings, cutting back before you're cut from your job (and let's just assume it's going to happen) gives you breathing room in two ways: It boosts your savings and it prepares you for even further belt-tightening if necessary. It's hard to go from flush to broke; if you can take an intermediate cut in spending you'll benefit emotionally as well as financially. Also, when you're cutting back, I'd try to keep my dollars local. That means that I'd cut back on cable TV before I'd cut back on food at the Farmer's market or our monthly breakfast at our local diner.
3. Diversify your income stream. Relying on one job (even one that seems secure) is always a bit riskier than relying on two jobs, or more. Even if one spouse chooses to stay home, it's worth it to brush up your resume, gain skills, and be on the lookout for cash opportunities. In our town, mill jobs and timber (the mainstay of the economy) tanked; those who could parlay their skills into related fields did best (ie, mill workers who'd paid attention during shop class/on-site maintenance found jobs as maintenance workers with the county road yard; Log truck drivers headed an hour north to bring the hay crop in; hobby fishermen went to Alaska to work the fishing boats). If there's a skill set in demand in your area, learning it BEFORE the crunch comes couldn't hurt. In my case, I'm signing up for basic Spanish at our community college.
4. Have a plan. Figure out what you would do "what if." It seems to me that those who plan for adversity are better able to withstand it. Think about all sorts of scenarios, and what you could do under each one. Planning won't make it happen -- it will just make you able to respond effectively if it does.
5. Tell your kids the truth. If hard times come to where you are and your kids bring it up, let them know what's happening and how it might affect you. I remember asking my dad if his job was secure; he told me it was but talked about why some other people's weren't. His honesty reassured me and also prepared me for the times ahead. It also taught me that not everything is within our control.
6. Build networks. Now is the time to strengthen bonds between yourself and your coworkers, neighbors, and family. Strong communities with close ties do better in recessions because people help each other out. It might be as simple as sharing a ladder with a neighbor, or as generous as providing free childcare for friends who have to job-hunt unexpectedly. The families in our neighborhood who were able to ask for help seemed to weather the storm better than those left twisting in the wind by themselves.
7. Show compassion. We'd all like to think that hard work and sacrifice will always be rewarded, but recessions show us that isn't always the case. I'd say that for those of us who have enough to eat, a relatively secure income and a place to stay, remembering those who struggle is important. Food banks and homeless/transitional shelters (especially those that accommodate families without requiring them to split up) seem especially deserving of increased support. I remember this because the year I turned 8 the "gift tree" at our local mall was nearly bent double by the weight of the requests, and the requests for kids were for things like warm coats and underwear, not toys. I asked Mom why there were so many kids without warm coats, and why Santa didn't come to their houses like he came to ours. I don't remember Mom's exact explanation, but I do remember that we picked up twice as many tags that year as the last. I doubt we were really able to afford those gifts, but if that Christmas was skimpier for it -- well, I don't remember.
That's what my kid brain remembers. Others out there probably have better advice -- especially in the financial zone. My guess is that the sailors among us will probably say that if you see a storm riding on the horizon, you should plug the leaks, batten down the hatches, and prepare for a blow. But, you should also render aid to small craft out there with you.
