Aim To Make Yourself Recession Proof

David Lerner Associates The news headlines today say the US is facing a financial cliff.

In tough economic times, we may be tempted to overreact and make rash decisions, especially when the media is constantly bombarding us with doom and gloom. Instead of becoming a victim of all the bad news, it is better to remain calm, examine the facts, gain some understanding of what is occurring, and then take some smart measures to weather the storm.

It’s hard to understand how the country—and following that, the world—got into such rough economic shape. It’s very easy to adopt a generalized “it’s all bad out there” viewpoint.   A little study of the situation online or looking over financial publications will provide some specifics of what has happened, what’s being done about it and, most importantly, where there are signs of recovery and where things are getting better.

Practically, there are some prudent economic measures one can rely on during such times:

  • Wherever possible, stock up on emergency funds. Salt away some money that will provide a cushion that can help during lean times. Ideally, it should be enough to survive for six months to a year, but any fund is better than none, and it will be great comfort knowing it’s there.
  • Pay down debts, and don’t run up more. This is a good rule-of thumb in all circumstances, but especially during tough times. Use any spare cash to pay down the mortgage, pay off credit cards and any loans. At the very least, don’t take out another mortgage or incur further debt that might make thing worse when you can least afford it.
  • Adjust your investment portfolio. While advice along this line could run into pages and be subject to controversy, nearly everyone would agree that during an economic crunch it is better to adjust your portfolio to contain a majority of lower-risk instruments. Examine performance records carefully, and study prospectuses to discover those investments that fare better during recessions, and those that can hold up in different types of economic climates.

While the economic climate is unstable, do as much as possible to stabilize yourself, both financially and personally. The above is a great way to start.

By Martin Walcoe, SVP. David Lerner Associates

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

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