DOLLARS AND SENSE

Common sense answers to questions on personal finance

by Joe Plemon 

Q:  I keep hearing all the hype about a recession.  What is a recession and what can I do to protect myself from its effects?  

A:   Most economists agree that a recession is defined as a time when the Gross Domestic Product has decreased for two consecutive quarters.  A simplistic explanation is that when people are buying less, business profits decrease which causes some businesses to lay people off.  Therefore a recession could mean that you lose your job. 

           I recommend three things you need to be doing, whether a recession is imminent or not.

1. Change your concept of job security.  Your job security should never be based on whether your employer lays you off or not.  True security is based on your ability to produce.  Study, learn, plan and dream.  The only difference between your career status today and five years from now is the books you read and the people you talk to.  We live in a changing world and we need to change with it.  Never settle for status quo.
2. Get out of debt.  Losing your job could be the best thing that ever happened to you.  It is the impetus, for some, that pushes them to a time of great creativity and purpose.  But simultaneously struggling with debt could paralyze those creative juices.  Get out of debt now.
3. Build an emergency fund.  If you have three to six months of living expenses set aside just for emergencies, you will be able to breathe while seeking new direction.  An emergency fund is a critical part of any healthy financial plan and is a life saver should you lose your job unexpectedly..