Getting Out of Your Recession
By Glenn Ferguson

“Do not be too timid and squeamish about your actions. All life is an experiment.”- Ralph Waldo Emerson

You have heard it over and over again but do you really know what it is? It is on the lips of everyone, your coworkers, newscasters, economists, politicians, and even your preacher but what is it?

In fact most leading international rating agencies and economists now feel that the global economy is headed for a recession but what is a recession?

A recession is simply a period of general economic slow down measured by a decline in the “Gross Domestic Product” (GDP) for two or more consecutive quarters and continuing for at least six months. With Gross Domestic Product being the value of all the goods produced in this country- not only by Bahamians, but foreigners within the Bahamas. A little different from Gross National Product (GNP), another widely used economic indicator, which does not include goods and services produced by foreigners.

And a recession is characterized by a number of different trends, including:

  1. Loss of consumer confidence resulting in persons’ buying less
  2. Decrease in factory production
  3. Growing unemployment
  4. Decline in personal income
  5. Volatile and declining financial markets

While these changes may apply to countries and economies, it may surprise you to know that a recession is actually trigged by you. You the consumer losing confidence and displaying this lack of confidence by buying less; causing a rippling effect across the economy in production, employment and financial markets.

Once you understand that a recession starts with you then it is incumbent upon you to determine whether you are personally experiencing this phenomenon. The key question to ask is whether your gross domestic product - your income has been declining? The mistake most persons make is to look at the current dollar value of their paycheck without giving consideration to the actual buying power of their dollar.

You have heard and seen the decline in the value and ultimately the buying power of the dollar over the past few months that change is called inflation. Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, your purchasing power is falling. As inflation rises, your dollar will buy fewer goods, if the inflation rate is 2%, then a $1.00 pack of gum will cost $1.02 in a year.

If your income grew less than six percent over last year then you are in recession. Why? because inflation is running around three percent and a recession occurs when real income growth is less than 3 percent (a combination of the two numbers indicate that you will need to grow your income by at least six percent).

To change this you need to:

  1. Widen your streams of income. Your income should not be limited to just your paycheck but should also include passive income flows represented by profits from a business operation or investments. The more diverse your streams of income the better able you are to weather economic changes.
  2. Invest in yourself. Your personal development is one of the most important investments you can make during a recession. You must ensure that you have the skills that makes you not only an asset to your organization but also increases your marketability during these tough economic times.

Secondly, you must evaluate and take control of your finances. The five best ways to do this are:

  1. Reduce Expenses. Tough times are the best times to evaluate your spending habits o determine whether you are making the best use of your valuable resources. And the key to doing this is to track your spending for a period of thirty days, recording how you spend every penny. This simple exercise will not only surprise you but will help you to ensure that you are spending your money the way you intend to. “Taking Control of Your Money” workbook is great resource to help you with this.
  2. Reduce Debt. Pay down and get rid of all consumer loans. Your previous journalizing of your spending will give you the ability to accelerate your payments with the extra money you have found.
  3. Stop Borrowing. You should purchase only what you could afford to buy with cash. Only use your credit card if you can pay off the purchase when the bill arrives. Remember that credit robs you of future dollars as they are being used to pay for today’s consumption.
  4. Focus on increasing savings. If you are not saving at least twenty percent of your income now is the time to start. Apart from requiring you to pay your tithes and offering God also give us a critical example in the story of Joseph of how to over come tough times- Saving during good times.
  5. Look for growth opportunities. No other period of man’s history has enable him to empower himself financial like recessions. And with discipline you can do the same.

There is no question that life is cyclical and that you will have your ups and downs but if you are disciplined and diligent you can become confident again about your finances and get out of your recession!

“Today is your opportunity to make a difference in your present and in your future.”- A Wise Man

Copyright © 2009 - Glenn S. Ferguson

Glenn Ferguson is a Financial Speaker, Consultant, Coach and Syndicated Writer, helping you to painlessly take control of your money to create wealth for you and your family. Tel: 1-242-327-2453 - Bahamas Tel: 1-501-588-4621- U.S.A. http://investinginyou.org.

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Filed under: Economic Survival

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