5 Strategies to Survive an Economic Slowdown

With the recent turn of events, I have been giving a lot of thought about what to do in event of economic slowdown — i.e., recession, stagflation, depression, financial doom, or whatever you want to call it. As I put this list of 5 strategies together, I realize that they are nothing more than responsible and sensible financial management strategies — something that should be practiced daily, and not only during economic turmoil.

1. Practice Frugal Living

I believe frugal living is the basic foundation to sound financial success. A good place to start is with my 50+ Frugal Tips, Ideas, and Resources article. In general, the whole concept can be distilled down to these 5 tenets:

2. Bear-proof Your Investment Portfolio

Over the years, I have come to believe that best long-term investment strategy is to leverage a globally diversified investment portfolio consists of low cost passively managed funds that reflect your risk tolerance level and investment time horizon. This is a strategy that Larry Swedroe advocates, and you can read it in his book: The Only Guide to a Winning Investment Strategy You’ll Ever Need.

There are two main parts in this strategy:

  1. Keep the costs low — For instance, limit the number of trades, choose low cost brokerage with minimal fees and low trade commission fees, choose low expense ratio mutual funds, limit tax liabilities, etc.
  2. Diversify — Spread your investment across different stocks, asset classes, sectors, countries, and beyond equities.

3. Establish An Emergency Plan

If you lose your ability to generate income, do you have enough cash reserve to stay afloat? More importantly do you have an emergency plan to keep you out of trouble? Here are some good articles to get you started:

4. Protect Your Job

For most people, their job is their biggest source of income. During recession, the chance of unemployment increases dramatically, and we have seen many examples this past few months. Fortunately, there are a few things that you could do to project your job.

  • Networking — If you haven’t done it already, this is a great time to start.
    • Get to know your peers and the higher ups better.
    • Take on special projects that expose you to other people outside of your immediate workgroup.
    • Join caucus groups, industry groups, and associations.
  • Help your company increase profit and revenue
  • Help your company reduce expenses
  • Make sure your good work is noticed
  • Expand your skillset — Getting a new certification or skill can make one much more marketable.

If you ended up losing your job, here an article to help you: How To Deal With A Job Loss.

5. Diversify And Grow Your Alternative Income Streams

Now that you all your bases covered, it’s time to think about different ways to increase your income. If you are reluctant about building alternative income streams, I’d like you to consider this statement carefully:

Your job is not going to be there forever. You can’t work forever. And you can’t retire until you figure out a way to replace income from your job.

Don’t wait. The best time to start building your alternative income streams is now.

What others are saying about surviving economic slowdown:

About the Author

By , on Mar 25, 2008
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (32 Comments)

  1. Money Talk says:

    It has been many generations since we learned to live within our means and spend only what we could afford. We have all enjoyed the good times and now that the bad times have arrived all our governments want to throw us all head first into yet more debt.

    Does anybody really know how to solve the problem of this recession?

  2. Pinyo says:

    @Elisheva – Let’s put it this way, my blog gave me a 30% “raise” last year. My full-time job would never give me more than 5% on any given year.

  3. Summer says:

    Not so easy to get used to frugal living. Just one word, try our utmost to earn more instead of less spending. To survive, to enjoy. We cannot let ourselves changed abruptly. Also time to consider to find optional job and get additional money to relieve our burden, replenish our daily life, That also need time and energy. So dears, hope all of us good health.

  4. Elisheva Wiriaatmadja says:

    It is probably time to make a huge step in our career and start looking into other income opportunities especially ones that are potential to replace our full-time income eventually. Can’t rely on our companies/ employers for too long. This will get worse.

  5. Studenomist says:

    The best advice is to cut out 100% reliance on your full time job for income. We all rely on a full time job for steady income, but the goal should be to have multiple streams so that in case something happens to our steady job we wont be homeless..

  6. Jerry says:

    GREAT tips and so useful for now and when things get better. We need to have a plan and system in place. It can be our security and insurance for the future regardless of what happens. I just hope that Obama’s policies will lead to positive change for everyone.

  7. Pinyo says:

    @Aya — That’s a definite possibility. I agree that if you are not meeting your needs now, it’s hard to focus on other things that do not provide immediate relieve.

    @Kevin — I agree to the extent that long term investment strategy is not sacrificed — i.e., I would not stop contributing to 401k or IRA in order to build emergency fund.

    @Alisa — Great add about taking care of your health; especially when it could be expensive enough to bankrupt you.

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