Navigating the Recession

Recessions suck. The stock market is down, unemployment is up, and good news is sparse. But a tough economy doesn’t mean that you can’t improve your lot in life.

We’ve decided to use the recession as a time to simplify our lives and build a better financial system for our family. What follows are some of the steps we’ve been taking to shore up our finances.

Seek additional income sources

If your emergency fund is small (or non-existent), or you simply feel a need to improve your safety net to protect against possible job loss, look for ways to generate extra income. You might be skeptical due to the high unemployment rate, but that doesn’t mean it can’t be done.

In order to succeed, you’ll need to think creatively and be willing to try something new. Consider the following…

  • Get a part-time/temporary job, or do odd jobs. This option can be time-consuming, so be sure any opportunity that you pursue fits your existing work schedule.
  • Sell used stuff on eBay. You can reduce clutter and raise some cash for yourself and your family.
  • Look at your skills and freelance. I’ve personally found this to be a practical way of generating some income and beefing up my resume.

At a loss for specific ideas? Check out this list of ways to earn extra money.

Organize your finances

Now is the time to reduce your unnecessary expenses. Your goal should be to increase the difference between your income and expenses, thereby giving you the leeway to build a financial cushion. One great way to start is to simply create an automatic transfer that puts a bit of extra money into savings every pay period.

  • Review your recurring expenses. If you’re paying a monthly fee for something that you’re not using, or not using enough, then get rid of it.
  • See if you can reduce your bills. Start looking at your expenses to see if you can reduce any of them. You can often save money by negotiating your bills, even without reducing your service.
  • Pay your bills on time. Having a good credit history can help you in a variety of areas, such as finding a job, saving money on insurance, reducing your interest rates, etc.
  • Automate your bills. We automated our bill payments to save time and reduce late fees. Many banks and credit unions now have free online bill pay, so it’s cheap and easy.

Be careful with your credit cards

As convenient as they are, credit cards can be a dangerous thing. Don’t fall into the credit card trap when times are tight.

  • Don’t use credit cards to make ends meet. You might be tempted to use your credit cards to get through tough times. Don’t do it. If you can’t afford something, then wait and save before spending.
  • Get a better rate. If you carry a balance, call your credit card companies and ask them to reduce your interest rates and/or work on a doable payment plan.
  • Review your monthly statements. Identity theft and other types of fraud are becoming more common, so be sure to look closely at your statements every month. You might also want to check your credit report.
  • Keep your credit payments in check. If you’re unable to pay the minimum amount due, call your credit card company and talk to them about setting up an affordable plan.

Don’t rush to use government programs

With the Cash for Clunkers program and the First Time Homebuyers Tax Credit all over the news, you might be tempted to jump on the bandwagon. Don’t do it.

Instead of making a rash decision, carefully weigh the costs and ask yourself if this is something that you really need (and can afford). These programs can be a great deal for those who were already looking to buy, but they shouldn’t be used as a justification to buy.

Your thoughts?

What steps have you taken to solidify your finances in the face of the recession? Do you have any tips you can share?

29 Responses to “Navigating the Recession”

  1. Anonymous


    I’ve had a few of my friends laid off and some whose work has been cut to the bone. One good thing for many of them was the fact that they kept their expenses relatively low and a few have a decent emergency fund.

    I hope they can find some employment to at least keep them from draining their emergency fund until they can back on their feet.

  2. Anonymous

    Whether you make $15,000/year or $150,000/year, everyone should learn a few basic tools for spending and saving:

    1. Try living off half your income! This will give you a better idea of what your expenses are going to look like if you should every become unemployed, or start working a less-paying job.
    2. Get a second Job! One of the biggest issues that I see with people today, is that they are not willing to work harder for the things they want. If you canot afford your expenses or can’t save, MAKE MORE MONEY.
    3.Pay yourself before you pay your debts. Do you have 3-6 months (at least) worth of liquid savings? If you don’t start building it up! It is more important to have a large cushion of savings than to work ay paying off debts faster. As my mortgage broker says: “You can always access your savings if you lose your job, but good luck getting that extra $2,000 you put towards your mortgage this year back!”

    Of course, there are many other savings and income tips out there…. but it is most important to build yourself a safety net before anything else!

  3. Anonymous

    The San Diego snapshot: Traffic in higher-end restaurants and movie theaters are down, probably for the reasons mentioned up-thread (Netflix). On the other hand, the beaches have been packed, most likely with San Diegans on staycation and Americans eschewing Hawaii and overseas vacations. Several friends are unemployed/underemployed, a few laid off from near six-digit salaries.

    In regards to credit cards, I second the notion that they shouldn’t be used for the basic necessities–I’ve learned this from hard-won experience. In fact, one thing that did help was credit card debt settlement. My balance was above $10k and I was able to negotiate it down (with the help of a debt settlement) company to a more manageable level. Not for everyone, but hey, if you’re stuck….

  4. Anonymous

    RB (19)–Here in Atlanta the numbers are at least that high. I know too many people who are either unemployed or underemployed, and I live in an area that typically houses what you might call the “well employed”.

    That makes the current state of affairs more than a little surprising. The economy here is well diversified, so it isn’t as if we can pin it on the auto industry, or some other that’s faring especially poorly. (Though housing would be a strong candidate.)

    Government, education and healthcare seem stable, but otherwise the job losses are accross the board. In fact I’d guess that if you back those three sectors out of the employment numbers, the rate of UE would be much higher in most industries than the published rates. In that respect, the economy is considerably worse than surface factors might indicate.

    Streets are packed here too, but don’t know if there’s much spending. Restaurants are half empty though.

  5. Anonymous

    If unemployed, perhaps it may be a time to move to where the jobs are. The US average unemployment rate is 9.5%. The state with the lowest is North Dakota at 4.2% (what recession), and the highest is Michigan at 15.2% (ouch).

    My state is under the average, Texas at 7.5%, but we lost 41 thousand jobs in June (second highest job loss).

    For the unemployed architects, they could dabble in ‘landscape architecture’ for mid/high-end homes as a side job, or remodels, etc. Try to appeal to the common man instead of a big corporation.

    If an architect could give me a list of ways to change my house to make it more efficient, I think that would be worth $1,000 or so. I don’t think there is anyone that offers that type of service.

  6. Anonymous

    @RB – The number of unemployed architects is closer to 40-50% in many cities, and I wouldn’t be surprised if that’s low. I would say the majority of my friends are unemployed.

    Florida has been hit particularly hard, so while I do see certain bars and restaurants doing well, we’re also seeing a slew of closures of high-end restaurants that have been around for years.

    Like some people pointed out, the ones that are doing well are the ones running good deals.

  7. Anonymous

    Getting a part-time job is an excellent idea for two reasons – first the obvious one (more income!) but secondly because it means you have less free time to spend money.

    Some second income streams can be somewhat sociable (for example, working a couple of nights in a bar) so you might even find it paying for your social life.

    Currently I’m trying to build passive income streams to cement my finances, but that does mean a lot of sitting about at home — raising the temptation to waste more money in wanton hedonism.

  8. Anonymous

    Hi Rosa – You make a good point. I have a vacation property in Lake Tahoe which we rent out when it’s not in use. A lot of people in the Bay Area are just driving 3 hours to Tahoe instead, of flying somewhere else with the added costs. I noticed a big surge in rental income during the winter as well, as travelers decide not to fly to Utah or Denver. That said property prices are depressed, but I don’t plan to sell forever anyway since it’s a lifestyle decision.

    I swear to goodness that mid-end+ restaurants are doing very well in San Francisco. Restaurants that cost $25-50/person for lunch and $50-80/person for dinner are ALL PACKED. And restaurants aren’t lowering their prices either.

    Netflix stock is doing phenomenal in this downturn, exactly for the reason you describe.

    I’m getting very bullish for 2010 with what’s going on now. A lot of pent up demand is building to buy “things” after the past 18 month debacle.



  9. Anonymous

    RB, our local press is reporting that local bars & bands are doing great, because people can’t afford to take a traveling vacation so they are “treating” themselves to more nights out – you can pay a lot of $5 covers (or even $20 circus tickets, which is what we did this weekend) for the cost of a one-week vacation, even a really thrifty one.

    A lot of local theaters seem to have discounted their tickets and our dollar movie theater has stepped up its lineup a lot this summer.

    Restaurants are having a hard time, I know – a bunch of our little local places have disappeared or are only open because they haven’t found a buyer for the building yet.

  10. Anonymous

    Just wondering, but do you guys know a lot of people who are unemployed? The official # is 10%, but perhaps it’s closer to 15% with the underemployed. I thought the stock market would start trending down by this point as unemployment marches higher, but on the contrary, the stock market keeps making new year highs.

    Bars, restaurants, streets, buses are all packed. My eyes are not deceiving me, are they guys?

    Rgds, RB

  11. Anonymous


    sorry to hear about your struggles. Like Nathon recommended, Dave Ramsey has a step by step program on getting yourself out of debt. You can usually find his book for free at the library.

    Can you also try to freelance your talents, perhaps tutoring? I used to do that in high school and a little in college and was paid around $10-20/hr. It’s not a lot, but it can give you some breathing room.

  12. Anonymous

    Another thing I am looking at in relation to income is diversification. When times are tough I would rather make $200 a week from five sources that $1,000 a week from one. This helps in reducing dependency from one source, rather than merely just increasing income.

  13. Anonymous

    The recession is what it is; it’s up to us to make something positive of it. It should be a reminder to us all that life is more like a roller coaster than an elevator, and knowing that we should be better prepared for the uncertainties of the future.

    At a minimum it’s a lot easier to be frugal these days because there’s more company doing it.

    But on a positive note, once the downturn is over, there will be some real career opportunities as new career fields open up. In addition to saving money and cutting expenses, we should keep our ears and eyes open for what ever may be coming down the road.

    LOL (9)–Solid advice!

  14. Anonymous

    Nancy, many personal finance nerds, including myself, recommend Dave Ramsey’s books The Total Money Makeover and Financial Peace Revisited.

    Please take a look at these.

  15. Anonymous

    My wife and I have been really frugal before the recession with our money. Our goal is to get out of debt. We have both started side jobs (web design and tutoring). Like RB said, we all have something we can do for $.

    In addition, instead of getting another car, we’ve decided to get my car repaired. And since we don’t have a car payment, it really is the best option during this time

  16. Anonymous

    We all have some special skill we do better than the other. Mine are guitar and tennis. I’ve taught both for $30-50/hr before, and that extra $300 or so a month sure helps in spending.



  17. Anonymous

    I think recessions are good as well — it cleans up a lot of ‘inefficiencies’. Companies should be allowed to fail, and let a better competitor step in to take up the space.

    Unfortunately, individuals get caught up in the cleanup, and suffer for it: unlucky enough to work for an inefficient company and get laid off, for example.

    Nancy, I feel for you, but I’m not a credit counselor. I think your first priority would be to get an income re-established (find a job) and to try to stop digging a deeper hole with debt (cut spending). If you are overextended with assets you can’t really afford, you might consider selling a car, house, etc…

  18. Anonymous

    This is a not so bright question do I get a “doable” payment plan. I am unemployed and the EDD checks are not enough, I have been paying my phone, and car insurance with credit. (canceled gym, coffee, all perks, except for my internet)

    I truly am at a standstill, I have never missed any payment, credit decent, but I am overwhelmed, am pretty alone in this. I do not not what to do. Many, many thanks.

  19. Anonymous

    Being organized is very key and can help to saving more, and adding to vacation or emergency fund. I think just spending within your means and being organized is the way to beat the recession.

  20. Anonymous

    This recession has helped me be more dilgent with my budget and helped me define my future goals. I believe it has also helped me to be more efficient with my money. In the future (I hope so at least), I won’t buy more car than I need or more house than I need, and I’ll have a bigger safety net for the next down-turn that will inevitably come.

  21. Anonymous

    At the very least this recession has made people start to think about their personal finances. That is a good thing.
    Thanks for the reminder to start organizing finances. Perhaps I will get to that tomorrow …

  22. Anonymous

    I’m hoping that this recession can help people get back into the habit of frugality and savings. I’ve moved to a more freelance income with this economic climate, but we’re happy we can still pay bills, work down my student loans, and save a bit.

  23. Anonymous

    There’s really a lot of positives that come out of a recession – I think the key is getting over moping around and getting down to business.

    As more and more people realize that they have re-discovered their priorities and how to be creative and innovative with their lives, we may just get out of this thing. 🙂

  24. Anonymous

    My wife & I look at this recession as a blessing in disguise. A chance to repent of our old and irresponsible financial behavior and start anew.

    We have made huge strides to cut our expenses, increase our savings, and diversify our income.

    These are tough times, but like a lot of difficult situations… it seems to be bringing out the best in people. I know that has been the case in our lives.

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