Our network

How Another Recession Would Affect You | News

Title (Max 100 Characters)

How Another Recession Would Affect You
News

How Another Recession Would Affect Consumers There is much debate as to whether or not we are in the midst of another recession or about to hit another recession. But practically speaking, what would a double-dip recession mean to you?

Jobs- High unemployment has been a persistent problem with many individuals having been unemployed for a year or more. An already tough job market would suffer greatly as businesses would pull back even further from hiring as they waited for some improvement in the economy. Chronic unemployment creates problems in terms of consumer spending and the need for increased social programs to keep the unemployed from becoming destitute.

Lack of credit- the lack of credit will continue and worsen. This has hurt the economic activity of both individuals and small businesses. Banks have been less willing to lend money to companies with fewer than 100 employees and individuals have had a very hard time obtaining credit which puts less cash flow into the economy.

Housing- the housing market isn't projected to start rebounding until 2020. A double-dip recession would further delay any recovery. Currently, there is a large number of homes underwater and owners that would sell their homes cannot afford to do so because they cannot afford to pay the bank at closing. Most importantly, the home was the primary source of money used for retirements, home renovations and consolidation of debt. Without these funds, entire industries are being left without consumers.

How do you cope?

1.) Debt management- now is a good time to get any debt issues under control. Continuing to live from paycheck to paycheck is not going to be an option long term. Before the economy gets worse, if it gets worse, any debt that is unnecessary, get rid of it. Start living well below your means, if you can't afford to sell your home, look at it as a long term investment and develop a plan on how to incorporate it as a long term part of your finances.

2.) Maintain a decent credit score- as banks and other credit granting institutions continue to tighten lending it will only be the most credit worthy applicants that will be able to obtain credit. This will impact individuals as well as small business owners. Lending institutions have started checking the personal credit of business owners even if they are applying for a business loan not a personal loan.

3.) Be sure to stay on track with saving and retirement- A rainy day fund will be imperative now. With access to credit getting more difficult, you will have to have savings to cover expenses in the event of a job loss or emergencies. In addition, since the home is no longer a source of cash, you can no longer expect to treat this like a piggy bank for retirement. It will be important to work with a financial planner to ensure that your retirement plan is sound. Another recession will have a marked negative impact on the overall economy, but if you spend and save wisely, you can definitely keep your personal financial situation out of the fray.

Jennifer Streaks, Finance Expert Continue the conversation by following me on twitter: @jstreaks.

News