It’s Official Folks - We’re In A Recession

According to MarketWatch, the U.S. has been in the midst of a recession for the last 12 months:

The U.S. economy entered a recession in December 2007, a committee of economists at the private National Bureau of Economic Research said Monday. The economy reached a peak in December and has been declining since, according to the business cycle dating committee of the NBER. The committee does not judge a recession as two consecutive quarterly declines in gross domestic product; rather, it looks at four key monthly economic indicators, including employment, industrial output and sales.

While this news probably doesn’t come as a surprise for many of you, I’m personally glad that it’s finally been confirmed. The first step to resolving a problem is admitting we have one, right?

So What Should You Do Now?

1. Chill out emotionally.
   Look, we’ve experienced recessions before. We’ve come out of them in one piece and we’ll do the same this time around. There’s no reason to work yourself into a tizzy over factors that are clearly out of your control. The important thing to keep in mind is to not panic. Contrary to what the media would like you to believe, the sky is not falling. We will get through this.
2. Chill out financially.
   Obviously December isn’t the best time to adjust your budget and curtail your spending, but if you’re worried about the recession, your job, or your investments, now is the time act like a grown up and make some tough decisions. You may want to consider cutting back on gifts this year either by not spending as much or by just purchasing gifts for immediate family members and cut back on friends and co-workers.
3. Bolster your emergency fund.
   In times as crazy as these, it’s impossible to predict what’s going to happen next. To ease the burden of dealing with unexpected events such as layoffs or family emergencies, you should consider keeping 3 to 6 months worth of living expenses in a savings account or money market fund. Wherever you stash the cash, it’s important to keep the money liquid - you want easy access to it in the event of an emergency. If you don’t already have an emergency fund, I highly recommend setting one up with ING Direct - their website is a breeze to use and they’re currently paying a 2.75% APY.

Image courtesy of: Dr. Stephen Dann

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