A few days ago, I began my research into the often frightening and very often misunderstood word known as recession. In this episode, we continue to unlock the fiscal mystery that seems to have our country in a headlock…
Why is everyone talking about taxes?
Taxes are a way that the government can inject money back into the economy.
A way of reversing the chain—you buy something at a store= store owner buys something at another store= etc.
President Bush and Senator McCain believe that continuing the current economic trajectory with regards to taxes is the proper response. They feel that this is all merely an economic downturn, — not the R-word.
Both Senators Obama and Clinton call for tax reform in the form of restructuring the system – placing the burden of taxes upon the upper echelon of people and giving more breaks to the middle and lower classes.
While the politicians continue their debate over tax cuts/ breaks/ rebates/ and whether the term recession should be employed, you and I are daily facing the economic reality—whatever you choose to call it.
Recessions really hurt us twenty-somethings: that part-time job you were going to get to cover your car loans suddenly disappears because the store that was going to hire you decided to stick with it’s current staff; a creative project which you, a freelance artist, were going to contract suddenly gets indefinitely postponed as the company realizes it really doesn’t need a 20 ft mural in its entryway… etc.
So, while dealing with tax reform and providing economic stimulus packages will potentially help the situation, it is important for us to take measures to protect ourselves against this economic downturn.
How can I protect myself?
I’m glad you asked!
1. Cut up your credit cards!
No seriously—this could save your butt for two reasons:
→ First of all, as I mentioned in the first part of this article through the text-book buy back example, in a recession, the economic slow-down means that the money you thought you were guaranteed suddenly is not there—for example, you may have expected to work 40 hrs a week and planned your finances around that inevitability but now, thanks to job cuts, you’re only working 35 hrs/ week. Therefore, in a recession don’t spend money you don’t currently have no matter how certain you are that you’ll have it by the time the bill rolls around.
→ Second, credit rates tend to increase during a recession, especially if you are late paying a bill. This means that if you miss a payment, you may end up owing far more than you thought you did.
2. Cut back on your spending
Wait! Before you tune out—this doesn’t mean eating just rice or shopping at thrift stores! Here are some basic ideas:
→ Try walking to the corner store rather than driving or taking public transportation. Even if it’s only a dollar or so you save, multiplied out over a month, you’ll find you save a fairly significant amount.
→ Go shopping in your closet. You’ll be surprised how many shirts and sweaters you forgot you owned. Try making new outfits using the old stuff with some of your newer stuff for a totally different look. Take your well-worn shoes to your local shoemaker—for a comparably small sum they can dye, re-sole, and renovate until you won’t even realize they’re the same pair you wore all last fall (meaning your co-workers won’t either).
→ Instead of ordering a pizza, buy a frozen one and heat it up. Seriously—and I speak from personal experience now, you’ll be amazed at the price comparison.
3. Start your own business
Diversify your income:
Check out the gigs section at craigslist— from writing to housekeeping, from modeling to printing up 250 labels– there are people willing to pay you to do jobs they don’t have time to do themselves
Mary Kay Cosmetics offers a great chance to bring in a few spare bucks
Like pets? Have a few hours to spare in between classes? Become a dog-walker!
Become a professional babysitter– seriously– Check out babysitting opportunities in your area.
So, to sum up:
Bad News: We are in a recession/economic downturn which sucks and may hurt you financially.
Good News: Now you know what you’re talking about and, in addition to meeting hot economists (let me know if you find one– they’re an endangered species) you can take steps to protect yourself.