The R word
Headlines on news websites suggest that our PM and Treasurer do not want to entertain the idea that our next quarter may follow the last financial quarter and place us officially in a recession. I, along with other more qualified commentators, see the signs of a recession all around me. As much as I respect political leaders' trying to protect the economy by waiting and seeing, I think in this case it would be smarter to admit likelihood of a recession is an almost certainty unless the government wants to spend us out and further a property bubble. Better to go through short term pain and return the economy to a stable period again.
I suspect that behind closed doors our leaders are well aware that the economic news is not all gold. If it were, they would not have been warning against debt, for the last few months. I have no doubt that they are capable of responding to a recession. It would be naive to expect the good times to continue to roll.
If we expect a recession, and I do, how can you respond?
You may want to:
- Cut your losses. Sell anything you can not afford to keep if things get bad. Keeping a home makes sense. I would consider selling other properties, extra cars, electronics and furniture you can do without, if they are costing you money, or are unnecessary. You may want to look at buying a smaller house if you buy a sell in the same market.
- Reduce expenses. Get rid of everything you do not need, or want. Look at all your expenses and ask yourself how they support you. and those you love.
- Put aside an emergency fund. Aim to save three months worth of expenses for worst case scenarios.
- Check your budget. Look at your expenses and track them for a while.
- Look at worst case scenarios and decide what you will do if they happen. Knowledge is indeed power.