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What Should the Average Person Do In a Recession and Financial Crisis?
I was recently asked, "What should the average person do in a recession and financial crisis?"
My first thought channels The Hitchhiker's Guide to the Galaxy: "Don't Panic. "
On the family budget side, if you have NOT been living within your means, this is a good kick in the seat of the pants. Figure out how you spend your money, then cut back on frills until you are living within your means.
If you HAVE BEEN living within your means, evaluate your vulnerability to recession. If your income is fairly stable, then there's no special action needed now. If you work in an area vulnerable to recession, such as many manufacturing industries, then do contingency planning. How would you handle a layoff? Start laying the groundwork now for a tighter budgets. Make sure you have an emergency reserve.
On the investment side, allow me to repeat: Don't panic. This is not the time for wide swings in your investment plan. If you have been well diversified, then chill out and relax, even if your portfolio is down. In the long-run you'll be OK.
However, if you've been over-weighting certain sectors, this might be a time to rebalance. Look at Lesson 4 of The ABCs of Your 401k for guidance.
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