SURVIVE THE RECESSION

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Chapter One

One of the major cautions we need to put into consideration during the recession period is how we handle our financial situation. No matter how rich or wealthy we are, if we don't manage our finances wisely, we may run into financial mess at end of the day. We should try and put every single ways of our spending, savings and investing into consideration.

Building up an emergency saving plan is one of the best ways we can prepare for recession. We want to be sure to have money set aside in a rainy-day. Fund that we can get to immediately, without paying a penalty. The best place is a money-market account at a federally insured bank, savings and loan, or credit union. We should try to build up an emergency savings fund that equivalent to three months' worth of living expenses. We should try and save more through an automatic saving plan. Not a 401(k) or other retirement plan. But they are for money we won't need for a while. When we're preparing for tough times, we need to focus on money we could use soon. An automatic savings plan arrangement will let us have a specific amount of cash automatically transferred from our bank's checking account to a mutual fund each month—a money-market mutual fund or short-term bond fund are our best choices.

Pay down our credit card debt is another way out in recession period. In a recession, we really need to make every penny work for us. Using our hard-earned cash to pay 12 to 23 percent interest on credit cards is not wise. So the more we can reduce our credit card debt now, the better shape we'll be in if times toughen. Whenever possible, we should try to pay off our card balance in full each month. Certainly, we should work hard to pay more than the minimum.

Recession time is the time to review our homeowners' or renters' insurance, life insurance, health insurance, disability insurance, and auto insurance coverage. We want to make sure that if our household has a financial calamity like sickness, our car has an accident, house damage, and job loss we'll have protection. If we can't bear the thought of wading through our policies, we should call our insurance agents or employer's benefits' department and have them checked our coverage for us. Who knows? We may find that, circumstances have changed since we bought the policies and we don't need as much coverage today.

Another way of helping ourselves is to buy another life insurance. Say for example, if we have term life coverage that's several years old, we should shop for a new policy. Competition might have lowered prices so much that we can probably buy the same coverage on better terms than were available a decade ago, even though we're 10 years older. For instance, a 40-year-old female nonsmoker could pay under $30 a month for $500,000 worth of 20-year level coverage. Comparison shop for policies at accuquote.com. We should look for a policy worth about five to 12 years of your salary. Our family will thank us for making this smart move.

Spend less could save us a few bucks that we could then save in our emergency savings fund. This is one of the hardest money-management moves to make. Most of us enjoy buying things and find it difficult to break habits, like that daily Starbucks Venti Cappuccino, cigarette, beer or the weekly restaurant visit. If we can put it into moderation, there are chances that, we can trim our spending. If we are not convince, we should experiment how to track our spending by write down or keep the receipts of everything we spend each day, for a month. Then total up the categories (food, clothes, entertainment, transportation, giving, etc.) and see how we can squeeze 3 -12 percent out of those totals. Categorizing helps us identify our weak points. Who would have guessed we spend like $250.00 a month on lunch? But now that we're aware of it, we can make the decision not to do it anymore. Keep track of the money we're saving and put it in an account earmarked for paying down debt.

Hard economic times mean more layoffs. So we should update our rsum now, to be sure it's current in case we need to apply for a new job. We should try to contain the rsum to one page and avoid making it flashy or frilly. We want our work experience to stand out, not the document describing it.

We should try as much as possible not to max out our 401k or retirement savings. Despite what we've heard, stuffing all our spare cash into our employer's 401(k) savings plan isn't always a wise strategy. Instead, consider contributing only as much as we need to get our company's full match. Then stash any extra retirement savings in a Roth IRA—available from a bank, broker, or mutual fund - where earnings and withdrawals are tax free. "Basically, $1,000 in a Roth is worth more than $1,000 in a 401(k), because when we withdraw 401(k) money, we'll pay taxes on it," says Jean Fullerton, a financial planner in Manchester, NH.

We should put the ideas of saving for child education as secondary most especially during the recession. People save for their children's college educations, but we've only got one chance at retirement—and we can't take out loans for that," says Eric Tyson, author of Investing for Dummies. We should not skimp on retirement savings in order to fund our kids' higher education. If we're putting money into a 529 plan, we should be careful how much we invest. We'll pay taxes on any 529 withdrawal that isn't used for education costs—so if our child ends up going to an inexpensive community college instead of a pricier private school, we could pay a big penalty. Aim to save enough in a 529 plan to cover only half of our expected college costs.

Take notice of all we have is another way of saving cost most especially during the economic downturn or disasters. If anything happens to our home (like a fire or flood), having a clear record of our belongings makes dealing with the insurer much easier. But many people don't spend the time to do a proper inventory. Here's a shortcut: Take snapshots of each room and all the things in them (get brand names and model numbers), then we can upload them onto our computer. Make a CD of the photographs. Even easier: we should use a video camera and narrate all the necessary details. Then we are to keep a copy of the video or the CD in our metal lockbox at home or in our bank's safety deposit. Doing all these will definitely save us money.

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Learning how to use Money software is very important during hardship condition. It doesn't matter if we choose Quicken, Microsoft Money, or another leading brand. They are all similar and can help us get our financial life in order. "I think the biggest mistake the average person makes is failing to maintain adequate records," says Roy Frick, a licensed public accountant in Ocean City, MD. "When we use software, that job is a whole lot easier." The headache is in the setup, which can take a few hours. We best bet: Tackle this job as we're doing our taxes, when our records are all assembled. We should set aside one Sunday afternoon, and get it done. This will definitely help us against mismanagement of our finances.

Credit fixing is another way of bailing ourselves out of financial mess. Majority of us read the papers, listen to news, so we know: Many mortgage companies...