Are YOU ready for a 1930’s strength recession?
There is a growing chorus of predictions that we are about to have or may already be in a recession of a strength and depth not seen since the 1930s’.
Seeing the events unfolding all around us, this is not surprising.
- Food prices have been on the way up and are not showing any signs of stopping their climb.
- Corporations are tightening belts and as usual one of their first targets would be reducing employment costs by way of mass layoffs.
- A number of the big banks are walking around with hat in hand seeking infusions of capital to stay afloat.
Many of the personal finance bloggers (myself included) and probably many of the financial journalists around would not have gone through or were too young to fully appreciate the difficulties of the 30’s Depression. I guess the best lessons would be scenes from movies as opposed to books or articles. After all a picture does say a 1,000 words.
For me, reading JD’s post on his review of the book “A Tree Grows in Brooklyn” transported me mentally to the time of 1901. I would strongly recommend that we should all read JD’s excellent post again and soak in very sound financial advice.
You may have heard the story of a frog which was put into hot water. It immediately jumped out. When the same frog was put into room temperature water and the water slowly heated up, it stayed there till it died. An economic recession also works in much the same way. Slowly it envelopes us and before we know it, we are down and out!
I think there are enough experts saying that this depression scenario is a given, and enough saying that times are different now, so the recession won’t be so bad.
Whatever the final expert opinion may be, rather than being the frog in slowly heated up water, it should be mandatory for us to prepare and run through a checklist to see how well prepared we are.
Going through the blogs and other articles on preparing for a recession, a reasonable checklist seems to be :-
a) Cut down fixed expenses, especially debt payments
My family has already taken the first step towards achieving this by selling of one of our assets, a house we have had for the past 16 – 17 years. The proceeds of which are earmarked for some serious debt reduction.
b) Practice frugality to the hilt.
Blogs like Lynnae’s Being Frugal (see her post on frugal tips to survive a recession) and other posts like GLBL’s suggestions on how to save on groceries should become staple reads for all of us. Tips learned should be applied to bring down the cost of meeting our needs. Of course all wants should be postponed to a later time.
c) Aim for and become as indispensable as you can at your workplace
d) Cultivate skills that will be in demand.
We have started a goat farm. Though it has been said that handyman skills like plumbing, electrical repair work, etc will be of particular use, since people will try to stretch out the useful life of their property, I think being a vendor of food products via our goat farm will be useful.
e) Reduce the dependence on the money economy.
I particularly liked this statement I read in Wise Bread. Growing some of our own food, making our own clothes, doing our own cooking, own laundry, barter etc may be classified here. We intend to grow our own vegetables and raise chickens also on the farm. I think this should help bring our monthly food bill considerably.
f) Have a healthy emergency fund
My emergency fund has been somewhat depleted due to some unexpected expenses as well as additional investment on the farm. My wife and I have made provisions to replenish it from the proceeds of the sale of the house.
g) Stockpile medications and Independent Health insurance
I have some ongoing medication costs. Since reading about the generic alternatives I have changed “brands” and the cost has gone down considerably. I don’t intend to seriously stockpile the medication, as I carry about 3 month’s requirements currently and will replenish once it goes to two months. We have always had our own health insurance, so there is no dependence on my employer.
Having never experienced the financial effects of a recession directly, much less a 1930’s grade one, I am not really sure how I’ll fare raising myself and my family, if one hits.
For now, I just want to prepare mentally for the worst.
For obvious reasons, this is a popular topic and other more knowledgeable bloggers have also written their views. Some examples are listed below.
iii) KC Lau’s How a recession happens and 8 tips to prepare for it
iv) Money Central’s How to prepare for a recession
v) The Wastrel Show’s How I am preparing for the proposed Recession
vi) Wise Bread’s Preparing for a recession
vii) The Digerati Life’s Recessions and the State of our Economy
Picture Credit: Google Images