plonkee money an english-er's thoughts on personal finance

October 21, 2008

keeping your head in a recession

Filed under: education and career — Tags: , — plonkee @ 12:00 pm

Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall,
All the King’s horses and all the King’s men
Couldn’t put Humpty together again.

From my vantage point, it looks suspiciously like a recession is inevitable. In the UK, we haven’t had one for about 15 years, so given the boom and bust cycle we’re about due anyway. Given the increasing globalisation of recent years I expect the rest of the world will be joining us.

Now, I know that all the central banks have been pumping money in to try and resuscitate the financial system, and several banks have been partly nationalised. As far as I can tell, this is an attempt to prevent complete financial collapse (want to know what that looks like? try Iceland), not to completely stave off a recession. Only an idiot thinks that things can keep growing and growing uniformly.

Thing about having boom and bust economic cycles as we do is that there have been recessions before. The bust section is not as much fun as the boom section but it’s not the end of the world. I’m not old enough to have really been affected in the early 90s, but I know that some of my parents friends were caught in negative equity (as I may well be) and several others were made redundant. But, they had skills and education, and were not out of employment for long.

I’m thinking that in a recession it’s more important than ever to follow the basic rules of personal finance, plus

  • keep up with industry news
  • have a cv nicely polished
  • keep learning and extending skills
  • diversify your income if you can
  • bump up the emergency fund

Finally, be realistic. In many recessions, one or more industries permanently downsizes. If you’re working somewhere that was looking fundamentally shaky a couple of years ago (say, US car manufacturers) chances are excellent that it’s only going to get worse.

If there’s no real future in what you currently do and you’re more than a couple of years from retirement, much better to get off the sinking ship first. Develop transferable skills, find a new career, be open to other possibilities. Remember, you’ll probably be fine, even if your current job isn’t.

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