How Would A Recession Affect You?

Posted by Allison on 5 April 2009, 10:55

You cannot have failed to hear, read or see something concerning the possibility of a recession in recent months.  It is well known that society tends to follow a boom and bust cycle – first of all everything is good, we are secure in our jobs, companies are looking to advance and take on more staff, we're all out buying plenty of goods and luxuries for ourselves, house prices are rising and we don't worry about what the future might bring.

But then it all starts to change, and although we cannot always see exactly how or when it does so, the effects can be all too clear to see.  House prices that were once buoyant start to fall and sometimes even plummet, companies start to tighten their belts as sales fall (purely because we are more cautious of spending money), the jobs that were once quite secure suddenly don't seem anything like it, and the future looks anything but bright.

Those are the effects of a recession, but they can sometimes be felt even before a proper recession takes hold and we experience the inevitable 'bust' part of that cycle.  World currencies also take a hit as we have seen recently with the fall of the dollar.  While these currencies can regain their previous strength after a while, it is usually enough to add to the problems that a particular country is feeling.

As soon as talk of the possibility of a recession starts, we turn our attentions inwards to see how we would be affected if it did happen.  Just as companies tighten their belts it can be an equally good idea for us to tighten ours, in order to make sure we can ride out any threat of a recession as easily as possible.

But of course while there is a lot that we can do to cope during a downturn in our country's economy, there is also a lot that can happen which we have no control over.  A good example is the price of goods.  If certain staple items of food suddenly become more expensive we have no choice but to switch to something else that is cheaper.  It is either that or swallow the cost ourselves.

Of course it should be expected that during a real downturn in a country's fortunes many businesses will find themselves unable to offer a decent pay rise to its workers.  While many jobs and industries will at least ensure their workers get a 'cost of living' pay rise to cover the rise in many everyday items that need to be paid for, this isn't always done.  What this effectively means is that some people will be getting paid less for the same job they have always done.

While the initial and most obvious thing to do in the face of a full blown recession is to panic, this is neither productive nor useful.  While it may be difficult to do so, the best strategy is to sit down and see how you can make your own way through a recession as unscathed as possible.

Firstly you should consider your job.  Just because some industries and careers will be shedding jobs during such a time in order to stay afloat and ride the recession out, that doesn't necessarily mean that your own job will be at risk.  Think about what you earn from your job and put that money to the best use that you can.

It can actually work well to think of yourself as a company.  You bring in the wage that your company pays you, and it is then up to you to make sure that money is distributed in a way that will provide the best outlook for the future.  That means not spending any of it in a frivolous way or buying things that won't contribute to the stability of your situation.

For example, many people put off getting involved with home improvements during a recession.  If you are already halfway through a major renovation then it would make better sense to continue it, since leaving it half done isn't always recommended.  But if you have allocated a large sum of money towards some work, for example, you might be better off postponing it for now and keeping that money somewhere safe where it can earn interest for you until you need it.

The best attitude to take when a recession bites and you are affected by it (as most people will be) is one of being practical.  So long as you can remain level headed you will come through it much more easily.  Even if you are one of the unlucky ones and your own job goes, make sure you check out all your options before proceeding onto the next stage of your life.  You may be entitled to redundancy money, and some companies offer coaching and advice to help redundant employees get another job more easily.

In short, use all the resources available to you in order to move ahead with more confidence, regardless of whether you can retain your job or not.  There are always options, and keeping level headed in order to analyse them and figure out your next move is the best way to proceed.

Some people seem to get through a recession more easily than others, and it can depend a lot on how much money they have in the first place, as well as what kind of career they are in.  Some are naturally more volatile than others, and will shed more jobs in the event of tough times.

In a time when the threat of a recession is still on everyone's minds, perhaps you should take some time to think about what you would do if the worst happened.  By preparing yourself mentally just in case, the actual event can be much easier to cope with. 

How prepared would you be if it kicked in today?