Thursday, October 30, 2008

Are we in a Recession?

To the average American, it might seem ludicrous to suggest that the United States is not in a recession right now. But economists' fuzzy definition of the term makes it hard to say when a recession actually starts until we're well into one. You might hear, for example, that recession occurs when gross domestic product (GDP) growth is negative for two or more consecutive quarters. But that's not an adequate measure, most economists agree. Right now there is a lot of talk about a recession. The financial buzzword that is out there this month is “Recession” and for good reason. t has become increasingly vital that as American citizens, we begin to understand how we can properly safeguard ourselves against the risk of a potential downturn in the economy. Obviously there are no real guarantees in life, but there are numerous healthy and advantageous steps that can be taken in order to mitigate your losses during any financial turbulence that should occur in the near future.

In the current context, the market right now is falling because of a perception, apparently a very accurate perception, that the banking and finance system is at great risk for losing money. One factor that is a better predictor of recession is the real estate market. Houses are being built, jobs are created and production in construction-related industries goes up; when real estate stagnates, those jobs and the related production are lost. Refinancing on homes also frees up money that homeowners can spend on other things, but when homes drop in value, there's no money to spend. Here are some steps that you can take to recession proof your life.
  • Clean your finances Up
  • Keep focusing on making a financial plan
  • Make yourself invaluable in your profession
  • Figure out a way to earn real money
  • Think ahead and plan accordingly
The last recession the country faced was nearly a decade ago when the "dot-com" bubble burst, taking under countless companies and sending many to the unemployment line. But that downturn was mild compared to the recession the economy is likely heading into, which will probably be more comparable to the U.S. recession of the late 1980s.

The best advice is that think about the future and work on learning from the past. Think ahead and plan accordingly and you should have no difficulty overcoming the recession with the shirt still on your back. A recession does not automatically mean that your finances have to go south, but the more prepared you are, the better off you will find yourself when the waves die down and things go back to normal, so keep that in mind when recession proofing your life.

Check Out our President's view on recession:

There is no way for you to completely and fully protect yourself from a dip in the growth of the economy, but there are plenty of ways to ensure your survival during this period with as little turbulence as possible. There are of course some financial safeguards in place since the Great Depression, such as depositor insurance, and these have kept subsequent economic crises from reaching the same severe proportions, though that doesn't keep any recession from being downright dismal.

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