How an Economic Recession Could Affect You

Published by Monica on January 29th, 2008 in Work/Life | 9 Comments

With the US and world pending an economic recession, many Americans are considering how they will fare if the economy takes a turn for the worst. Here are some things for millennials to consider in case of an economic recession:

Less Jobs, More Layoffs, Longer Hours

Maybe. It depends what industry you are in. There's certainly a fear of losing your job or watching others lose theirs and having to pick up the extra slack by working longer hours.

Not all industries are the same, however; for example, restaurants and hotels will see a decline, while pharmaceuticals and health care services will probably stay the same. Some industries may even do better in economic recession, like the higher education sector as workers flood to grad schools rather than leave gaps in their resumes.

Tip: Find out how an economic recession affects your industry and company so you can better prepare in case it happens.

Tax Breaks and Rebates

It looks like many of us will be getting an extra $600 back with our tax return this year thanks to the White House. Whether that return will come in time to halt an economic recession remains to be seen, but either way it's important we take the money and spend it to stimulate the economy.

Tip: Invest the money by spending it on career or personal development – it's a win-win purchase.

Decrease in Property Value, or Lower Interest Rates

Now is not the time to sell property you own. If you plan on moving, consider renting the property out instead, or not move at all.

The good news is for renters or investors – now is a great time to buy real estate and build equity, provided you have a steady source of income and enough money for a down payment. Interest rates will be low for at least the next few months, so you will get a good deal as long as you have a high credit rating.

Tip: Make sure you will have a steady source of income before purchasing property and do your research! Buying a home is a big commitment.

401k Investments

For people retiring, the declines in the stock market are bad news, but for millennials, this is a great time to put your money to work with long term investments, like your retirement savings account. If you have a plan with your employer, now is the best time to either start or raise your contributions because stock prices are going down, meaning you'll get more shares for your money. Roth IRAs are another option if your company doesn't have a 401K plan.

Tip: Schedule a meeting with an HR person at your company to learn about your company's 401k plan and how to invest in it. If you are an old hat at 401K contributions, consider changing your contribution spreads to maximize the effects of recession on the markets.

Starting Your Own Business

Sounds crazy, but now might be a great time to start a business, depending on the industry. With a weaker US dollar, we could see growth in the US tourism industry. How about exporting products to other countries not (as) plagued by recession? There's even room for consulting about finances, investing, or anything else people might face in times of hardship.

Tip: Ensure your idea for a business is sound to capitalize on the current state of the economy and don't start a business that relies solely on an economic recession state. Otherwise, a growing business helps the economy out recessions, so you would be doing the country a favor.

It's important to understand how an economic recession could affect you, so start preparing now and consider capitalizing on some effects which might be in your favor.