How to Survive a Recession

Knowing how to survive a recession isn’t as simple as picking up a few tips until everything blows over. It’s more important to adapt to a mindset of not living beyond your means and prioritizing your needs.

A recession is a period during which a number of key economic indicators decline, including employment, trade, and a country’s gross domestic product. If a country experiences a financial downturn for two or more consecutive quarters, that time period is labeled as a recession.

Based on this definition, the U.S. has experienced approximately four recessions in the past 30 years. One of the most memorable recessions occurred after the 9/11 tragedy in 2001. The resulting economic downturn lasted eight months. Americans experienced nearly 10 years of growth prior to that time, so coupled with the tragedy, it was a dark period in U.S. history.

Economists state there isn’t just one factor that creates the downturn. However, for the recessional period beginning in late 2007, the housing market and the sub-prime lending fiasco created an unfortunate domino effect.

If you’ve been laid off or fired, your survival needs are greatly different than someone just wanting to cut expenses. Some people released from companies have severance packages or unemployment benefits. While both are a soft cushion for a while, the reality is you’ll still need to find a job.

During a recession, having almost any type of employment helps for a number of reasons:

• You’ll maintain cash flow.
• You’ll be able to network for additional employment.
• You’ll stave off depression by being productive.

Many people let pride stand in the way of gainful employment. Avoiding this trap is the first step to adapting your mindset and learning how to survive a recession. Many skills are transferable, even if you have to change industries or professions.

Most states have a workforce development office designed to provide job counseling and help you through the transition. You may be delivering papers part time for a while, but remind yourself that honest employment is honorable, and the situation may be temporary.

Also update your resume and develop a detailed job application prep form. This will help you be prepared at a moment’s notice to respond to an interview request.

Housing, transportation, food, health, and savings are the primary expenses. Everything else is negotiable. Assess these factors individually and develop an action plan.

• Housing: Do you have enough money each month for the mortgage or rent, as well as basic utilities? Create a spending plan that lets you forecast three months out what these expenses should be. Find ways to save money on utilities, even if it means dropping cable TV and the Internet for a while in order to keep the lights on.

• Transportation: If you live in a non-metro area of the U.S., a car is almost a necessity, because public transportation isn’t an option. If this is your situation, consider other alternatives. Two-car households can sell one vehicle; carpooling and car sharing with someone else might work, too.

• Food: Look for ways to save while grocery shopping and rely on frugal recipes to help you make the most of this budget. Some people develop one menu they use week after week: spaghetti on Monday, rice and beans on Tuesday, stewed chicken and frozen vegetables on Wednesday, and so on. This method might help you stock up on inexpensive staples during sales.

• Health: Unfortunately, health insurance for the unemployed is incredibly expensive. But, many people can afford catastrophic hospital plans for an individual or a family, even if it means you’ll pay considerably more out-of-pocket for regular care. This checklist is one way to help you put your needs in perspective. From there, research different plans. For example, this company’s website explains the difference between major medical or catastrophic plans and comprehensive insurance.

• Savings: All financial experts agree that you should always save, even on a limited income. Just $13 a week puts you up $50 for the month. Saving is another way to help you adapt your mindset and think ahead.

Now is certainly not the time to compensate for low income by charging everything. In fact, lock up your credit cards and use them for emergency purposes only.

If you have any debt at all, such as a credit card, car loans, and student loans, call your creditors immediately and tell them you’ve lost your job and need to work out a payment plan. In some cases, you may be able to get a reduced interest rate on a credit card, or a monthly extension on a loan.

Honestly, there aren’t many ways to control this if your company has to downsize. However, when managers schedule layoffs, they’ll clean up the weakest spots first. With simple modifications, you can remain proactive now and for the future.

• Work a little harder. It’s easy to have a “what are they doing for me?” attitude when times are tough. Stay focused and productive, however. Come in early. Work ahead. Take shorter breaks.
• Don’t complain. The adage is, “the squeaky wheel gets the grease”, but in many cases, that wheel is replaced. Everyone needs to vent. But, first consider if you’re contributing to an already toxic environment or actually affecting change before you speak up. You might be better off taking a 10-minute walk.
• Look for solutions. Your skill set is necessary, otherwise you wouldn’t have been hired. Constantly think of better or more efficient ways to improve your workflow, department, or line.

Use this time to become better at what you do. Take classes online, ask to shadow someone in a different division, or work with your manager to broaden your responsibilities. The more diversified you are, the better your chances for long-term employment.

You may still have a job right now, but manage your finances as if you’ll lose it tomorrow. Financial experts agree that in addition to an emergency fund you should have the equivalent of three months' worth of income saved in the event of unemployment.

Attain this goal by creating a spending plan similar to what we outlined above. Focus on necessities and streamline expenses. This shift in focus will help you in the future, regardless of what the economy does. Find ways to save money every day, such as:

• If you’ve snubbed grocery coupons before, try a few this week and see how you feel when you save a few dollars.
• Create a list of what you “need” to shop for verses what you “want” to shop for, then put it down for a day. Pick it up again the next day and see if you still need a trip to the mall.
• Instead of ordering pizza, try making one. This can be a fun and easy family activity that saves money, too.

Learning how to survive a recession first involves all the nuts and bolts of money management. But the psychological ramifications require attention, too. It’s easy to worry constantly or slip into depression during tough times. Maintain the simple pleasures of life to help you stay connected, laugh more, and keep a healthy perspective.

Here are a few ideas:

• Have a weekly friends and family potluck. For more fun, create a goofy theme, such as a chili cook-off or “clean out the freezer” night.
• Take the kids to the library and stock up on free books. Throw big cushions on the living room floor and read aloud to one another.
• Express gratitude. Some people do this by going to church. Others simply say, “Thank you” to their spouse for putting away the dishes. The more good you find in your life, the better you’ll feel.
• Exercise. Get the guys together for a game of touch football in the park. Walk in the morning with your galpals. Spend every Friday afternoon at the playground swinging with your kids.
• Journal your feelings. Writing worries down keeps them from rattling around in your head.
• Develop a hobby. Whether it’s something you used to enjoy or have been meaning to try, dedicating even an hour a week to it will help you realize what else matters to you. You’ll also increase your sense of accomplishment.

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