The Dreaded “R” Word

It’s amazing I spend four days mostly in bed sick and the world changes.  The Bank of Canada hacked it’s interest rate down by 0.25% (right after it’s 0.5% cut) and is actually saying it expects a mild world wide recession and that the US is actually already in a recession.  So that damn ‘R’ word is fully out of the closet now.

So I’m part of the age group that actually doesn’t recall that last time one of these came about so what the hell do I do about it?  Well here is my four step plan:

  1. DON’T PANIC.  I know it’s one of the oldest pieces of advice out there, but it still applies.  Sleep on all major decisions and try to think in logical long term time frames (if applicable).  Now isn’t a good time to complete rearrange your portfolio.
  2. Evaluate Your job.  Be honest here and don’t keep your head in the sand.  If you know you are in a vulnerable industry during an economic downturn (ie: layoffs are likely), jump the gun and start looking for a new job now.  The number of people looking for work will only get worse as time goes on in some industries.  Yet make sure your jumping to a safer ship otherwise what’s the point.  I know I’ve been cleaning up my resume and skimming job ads just to be on the safe side.
  3. Shore Up Cash.  I know I’m typically one of those people who dislike sitting on cash, but I’m even starting to build a bit of pile in the near future.  This especially applies if you think you could be laid off in the near future.  In down times, cash is king.  So make sure you’ve got your crown handy.
  4. Write Up an Emergency Plan. It’s never fun to think about losing your job, but it’s better to have a plan done in advance so if it does happen your not sitting there stunned after it happens.  What’s in an emergency plan?  Well at the very least you should have your resume updated, a to do list to reduce your money expenses (reduce your wants and safeguard your needs), and know where to go to apply for any Employment Insurance benefits that you entitled to.

So that’s my ideas, but I would love to hear from others on what they would do.  So if you got an idea or have some experience to share please leave a comment.

5 thoughts on “The Dreaded “R” Word”

  1. Funny that there’s a Buffett-related ad on the screen for this post, and he just lambasted anyone who plans on sitting on a pile of cash in these times…

  2. You could consider putting a little money on the short side of the stock market. It feels better if your one of he few people making a little from all this carnage.

    I have been using HXD.TO but there are other options such as Bear Mutual Funds. In the past I have tried buying PUTS but they have a life span which can easily run out.

    You can study Bear Markets and Recessions to see what might lie ahead. Learn from the past. For example, all Bear Markets contain significant Bear Market rallies on the way down. These rallies fissly when the pool of “bottom guessers” runs out.

    Human mass pschology has not changed, only the names of the investments have changed. We are not any more or less intelligent than our grandfather. We just communicate in a more efficient manner (web, emails etc).

  3. Astin,

    Good point. People can take the cash thing too far and hold it for too long. I’m refering to the short period holding of cash if you don’t have much for cash savings (like in my case). Yet if you already have an emergancy fund in place, go out there and buy.

    Tim

  4. Last year, a few months before my office closed down and laid off the majority of the employees, I started a budget. It was in excel, and for each month, I dutifully entered all my minor and major household, personal and financial spending. So, when the axe did fall, I already had a good sense of where to cut my spending, such as discretionary items.

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