Another Recession is Coming

Another recession is on the way. I can say that with near certainty, but no one can predict when it will come.

Most of us have painful memories of the 2008/2009 recession. Jobs were lost, homes were lost or had their value destroyed, salaries were cut if you were lucky enough to keep a job and all the markets plunged. Many had to postpone college, retirement or moving out of their parent’s homes.

That recession caught many, if not most, of us by surprise. It seems to be human nature to ignore the negative when things are going well. Why fix the leaky roof when it isn’t raining?

I sense a growing complacency in the population lately. Gone is the focus on frugality; building up an emergency fund; growing multiple streams of income; paying down debt and etc. The sun is shining, the economy is growing, the future is rosy, why worry.

We once again are immersed in the day to day doings of our individual lives – writing that next post, getting the kids to soccer practice, planning the next vacation, etc.

Why do I think another recession is coming?

History tells me it will come.

Mike Patton, contributor to Forbes, stated in Is Another Recession Looming?

“In the post WWII era there have been 11 recessions which equates to one every 5.9 years.”

Seems we are overdue by a few years!

The stock market has been wavering.

After steadily rising for 5+ years, the stock market indexes have been bouncing between pretty specific ranges for most of 2015. My (definitely non-professional) opinion of this is that we are on the verge of a major movement – and I think it will be downward.

The Fed will tighten money supplies.

Because the Fed has pretty much used up the tools at its command trying to bring the US out of the 2008 recession, they are eager to start tightening money supplies. With interest rates remaining this low and money supplies this high, some experts believe another recession would be much worse than the 2008 one, because there are few tools left to use to manage the economy.

Bill Conerly, in Forbes article: The Next Recession: Cause and Timing  explains how Fed actions could trigger a recession:

” If the Fed is late to drain reserves, then a galloping expansion triggers inflation. The Fed finally sees that it really has to stomp on the brakes to prevent the economy from overheating. The result is a cycle of inflation followed by recession, just like we experienced in the 1970s and early 1980s.

However, if the Fed acts too soon, it stops the expansion before trouble begins, causing an unnecessary but mild recession. Then the Fed will reverse course, injecting more stimulus, and putting the economy at risk again.”

We are in a world economy.

Even if one country avoids causing a recession, world economy or world events could trigger a global downturn which would affect many if not most countries.

What am I doing to prepare for the next recession?

Probably what you are doing – not much. However, I hope that we are at least somewhat positioned to make it through.

We have several income sources (none of which involve an employer). We have zero debt. Our life style is fairly inexpensive, but we could cut more corners if we had to do so. We have plenty of liquid assets (mainly because we refused to invest in bonds or stocks at their current high prices). We own two properties outright. We have emergency supplies of food and water. We have real assets we could use for barter if push comes to shove.

What should you do to prepare for the next recession?

Don’t panic.

I’ve lived through many recessions since moving out of my parent’s home 43 years ago. Some of them I didn’t even notice – they didn’t affect me. Others touched but didn’t harm and some harmed, but only temporarily.

Have faith in your ability.

You made it through the 2008 recession. You can make it through another.

Diversify.

If you are still working, tack on some more skills, just in case yours become unwanted or unneeded. Add more types of income (putting family members to work, taking on a second job, starting a side gig or whatever you can manage). Check the way your assets are allocated to try to balance them so that when one asset class drops in value, another goes up.

Stock up.

Beef up the emergency fund so that you have enough to support your family’s needs for a year. Buy a few non-perishable food items each week at the store so that you aren’t totally dependent on the food network. Fill that camping water jug with water and store it out in the garage or find a way to provide fresh water for your household for a few days if needed.

Do you think we are all overdue for another recession?  How will you prepare?

How Women Can Strengthen Their Finances after a Divorce

If you’re at the early part of your divorce proceedings, you may be experiencing a variety of emotions. From betrayal and confusion to sadness and panic, divorce is an emotional ride you probably want to immediately get off of. However, your emotions will soon begin to stabilize and allow you to focus on a brighter and more prosperous future.

Update Your Information

Discussions of money may have attributed to your divorce, especially if you didn’t know how to go about it. After the dust has settled, the list of things to do may seem daunting. Taking it step by step will help empower you in the future and allow you to take command of your financial freedom. You can begin with your information. This includes changing your name on your social insurance card, driver’s license and mail delivery. Your credit cards, banking information, profit sharing and insurance will also need to be updated. If you have a will, you’ll need to update the beneficiaries and items that you’d like your personal belongings to go to in case of an accident or death. Profit sharing account beneficiaries will also need to be overviewed and changed accordingly.

Securing a Home

If you have money coming to you in a divorce, you may be able to secure a dwelling for yourself and children. Finding a community that works for the family is important. It should be close to schools, work and social activities. After you’ve had the chance to get your credit in order, and you’ve found the perfect home that fits into your budget, you’ll need to secure your loan.

Knowledgeable and trustworthy companies can provide you with a deal that suits your needs. Every state in our union, has of course, different lending laws that are overseen by the Federal Government. Vintage Oaks specializes in loans in made for their communities in Texas for example. This applies to any province or state. Sometimes you may get a far better deal going with a smaller lender attenuated towards the rules of your province/state. Any company should also have competitive interest rates, closing costs and be transparent about those fees, instead of hiding them within a complex set of escrow paperwork.

Comprehensive Financial Plan

A lifestyle report may have been developed while you were going through your divorce. This helps provide a clear pictures of your assets, so you can implement a proper budget. From this analysis, you can keep tabs on the amount of money you have to spend, general upkeep on your home and costs for living and children expenses. You also need to determine the amount of money needed for retirement. If you were given a lump sum at your divorce proceedings, a financial plan can help you allot funds for home expenses and what you’ll need to retire.

Build Your Own Credit

As a married couple, you may have gotten a home, credit cards and loans jointly. However, now it’s time for you to build your own nest egg and secure credit as a single person. Achieving good credit means paying your bills on time and not spending more than you have. It can also be the pathway to obtaining new loans in the future if you stay within a budget. In order to do this, you want to begin by getting a copy of your credit report. If there are any inaccuracies or blemishes, you need to address them immediately. If you have a job, get a credit card in your name and pay it off each month. However, if you’re not employed, you’re going to face other obstacles in trying to achieve a good credit score on your own. The best place to start is by making your own income even though you may have alimony coming in.

Seek Help from the Professionals

A financial planner has the expertise to help plan for your future. They are also trained to budget your current funds and future retirement plans. A trained professional experienced in helping women after divorce may be a welcoming attribute. Because the financial needs of a woman after divorce are quite different than those of a married couple, the financial advisor can help you move forward.