Economic Indicators Point to a Recession, Make Sure You’re Prepared.

10 12 2007

Economic Indicators Point to a Recession, Make Sure You’re Prepared.

Posted by: admin in Money General Talk

For the last two decades the economy has been very strong as a whole. During the mid 90’s we saw the greatest period of economic expansion we’ve ever seen, and even despite the September 11th terrorist attacks and accounting fraud in many major companies earlier this decade, our economy has still remained very strong. The stock market has hit new all time highs and consumer spending has remained relatively unaffected.

The recent correction in the stock market as well as the significant slowdown in the real estate world are now making many economist wonder if we are heading in the direction of a recession. A number of the major banks have been hit with a major lack of capital due to the trouble they got themselves into by offering sub-prime loans and investors are worried. The stock market is currently in a correction, which is defined as a 10% drop from its peak, and if it dips down to a bear market, which is defined as a 20% drop from its peak, a recession is a definite possibility.

We don’t know if a recession will happen or not, but we should prepare ourselves financially in the event that a recession does come. The best way to prepare for an economic downturn is to get your financial home in order. That way if hard-times do come to you, you’re not in between a rock and a hard place. You should work especially hard to eliminate any debts that you’ve built up. You should also put some money aside in a separate savings account just for potential emergencies and job-losses. This will give you plenty of padding while you take care of whatever problem could potentially arise.

If you’re currently investing, you should keep doing so. If you’re investing for retirement or something else that’s decades away, you have nothing to worry about. The stock market has always fluctuated and by the time it comes for you to retire, you’ll have more than enough money. As the price of your investments go down, you’ll be buying additional shares at a deep discount, and when the economy does climb back up, you’ll have more money than you ever did before.