If you knew then what you know now: recession edition
November 19, 2016 12:43 PM Subscribe
Hypothetically, if you knew (or had strong suspicion) that a major global economic recession was on the horizon in the next few years, what would you do to prepare? Not like, society as we know it collapses into a dystopian Mad Max scenario-- buy all the gold and build a bunker; more like what could an average person have done in 1928 or 2007 that would have helped cushion the blow of an oncoming recession?
Back in 2008 I had a rough time, since I had just graduated from school and was super broke. I ended up spending a couple of years really struggling with unemployment. With the specter of another recession in the next few years, I've been thinking about what I could have done in 2007 to make things easier based on what I know now-- like, if people in the news in 2007 had been warning about a possible downturn what could I have done differently? (I probably should have taken some web design classes in school is what I have since decided, since that would have really helped my job prospects)
Now I live in a major East Coast City and I have a non-profit job. I'm going to keep putting money into my 401(k) and saving up to buy a house some day, but I'm just curious whether there's anything else I can do to prepare in case the economy takes another major nosedive.
Back in 2008 I had a rough time, since I had just graduated from school and was super broke. I ended up spending a couple of years really struggling with unemployment. With the specter of another recession in the next few years, I've been thinking about what I could have done in 2007 to make things easier based on what I know now-- like, if people in the news in 2007 had been warning about a possible downturn what could I have done differently? (I probably should have taken some web design classes in school is what I have since decided, since that would have really helped my job prospects)
Now I live in a major East Coast City and I have a non-profit job. I'm going to keep putting money into my 401(k) and saving up to buy a house some day, but I'm just curious whether there's anything else I can do to prepare in case the economy takes another major nosedive.
If you know it's coming, have a lot of liquid assets on hand so that you can invest after the crash. In practice, that means pulling investments out and saving cash. The more cash you have on hand, the more prepared you'll be.
In terms of employment, look for guarantees. Either something like tenure, or a long-term contract. You'd like to keep yourself from a situation where you could lose your job.
posted by kevinbelt at 12:52 PM on November 19, 2016 [4 favorites]
In terms of employment, look for guarantees. Either something like tenure, or a long-term contract. You'd like to keep yourself from a situation where you could lose your job.
posted by kevinbelt at 12:52 PM on November 19, 2016 [4 favorites]
Borrow money on long terms, sell financial assets. Nothing better than a pile of cash when times get tough.
posted by MattD at 1:02 PM on November 19, 2016 [8 favorites]
posted by MattD at 1:02 PM on November 19, 2016 [8 favorites]
My grandmother is a lifetime Republican because her grandfather owned a number of buildings in the Bay Area. Property is so safe! The land was seized under eminent domain during the Great Depression for one of the WPA projects, paying out at the bottom of the market.
Real financial security is in diversification and flexibility. If you'd be pouring everything into the strategy X, that's not true security.
posted by politikitty at 1:09 PM on November 19, 2016 [3 favorites]
Real financial security is in diversification and flexibility. If you'd be pouring everything into the strategy X, that's not true security.
posted by politikitty at 1:09 PM on November 19, 2016 [3 favorites]
Best answer: This (WaPo) article by Michelle Singletary, written earlier in January 2016 (ah, the good old days) has a lot of good advice. Basically, pad your rainy day fund as much as possible.
posted by invisible ink at 1:21 PM on November 19, 2016 [3 favorites]
posted by invisible ink at 1:21 PM on November 19, 2016 [3 favorites]
If you're looking for recession-proof savings, don't put your money in a 401(k), or at least make sure that your savings are going into limited-risk funds! As the recession deepens, you'll find that the limited funds you have available to borrow will shrink dramatically as stock prices drop. While pundits will say that your 401(k) will recover as the economy improves - and this is largely true - a 401(k) is one of your *least* safe methods to ensure money is available during hard times.
As implied by others here, government-backed liquid investments are your safest bets:
* FDIC-insured high-yield savings accounts (highly safe, highly liquid, not hedged against inflation)
* US I-Series Bonds (highly safe, moderately liquid, hedged against inflation)
* FDIC-insured certificates of deposit (highly safe, less liquid, moderately hedged against inflation)
In addition, cover yourself against catastrophic problems or fluctuations in prices:
* Try to choose the cheapest and least-flexible HMO option that nonetheless provides for 100% coverage of hospitalizations or serious illness
* Invest in energy-saving technologies that will limit your costs when energy costs rise during a recession. This could be LEDs, or solar panels, or energy efficient improvements.
* Pay off as much debt as possible while keeping your credit rating high
* Trim unnecessary items from your budget to better save money
In short, *save* as much as you can in cash or cash-equivalent assets as you can, hedging against inflation as best as you can without moving into recession-affected investments. If you do this, not only can you survive, you will have funds to *spend or invest* during the recession. That not only means that you can survive the recession, it also means that you can invest at the most opportune time, when stock and asset prices drop. The benefits of doing so can far outpace the tax advantages of a 401(k).
posted by I EAT TAPAS at 1:30 PM on November 19, 2016 [17 favorites]
As implied by others here, government-backed liquid investments are your safest bets:
* FDIC-insured high-yield savings accounts (highly safe, highly liquid, not hedged against inflation)
* US I-Series Bonds (highly safe, moderately liquid, hedged against inflation)
* FDIC-insured certificates of deposit (highly safe, less liquid, moderately hedged against inflation)
In addition, cover yourself against catastrophic problems or fluctuations in prices:
* Try to choose the cheapest and least-flexible HMO option that nonetheless provides for 100% coverage of hospitalizations or serious illness
* Invest in energy-saving technologies that will limit your costs when energy costs rise during a recession. This could be LEDs, or solar panels, or energy efficient improvements.
* Pay off as much debt as possible while keeping your credit rating high
* Trim unnecessary items from your budget to better save money
In short, *save* as much as you can in cash or cash-equivalent assets as you can, hedging against inflation as best as you can without moving into recession-affected investments. If you do this, not only can you survive, you will have funds to *spend or invest* during the recession. That not only means that you can survive the recession, it also means that you can invest at the most opportune time, when stock and asset prices drop. The benefits of doing so can far outpace the tax advantages of a 401(k).
posted by I EAT TAPAS at 1:30 PM on November 19, 2016 [17 favorites]
The last thing you want to do is pay off debt. Cash is infinitely more valuable than lack-of-debt during hard times, because in hard times, new credit becomes hard or impossible to obtain. Also, in hard times, lenders become desperate to avoid defaults and will do all kinds of things just to keep a trickle of payments coming in.
posted by MattD at 1:46 PM on November 19, 2016 [12 favorites]
posted by MattD at 1:46 PM on November 19, 2016 [12 favorites]
Buy utilities. People will always flush their toilets.
posted by DarlingBri at 2:13 PM on November 19, 2016 [3 favorites]
posted by DarlingBri at 2:13 PM on November 19, 2016 [3 favorites]
My grandfather was an (illegal) immigrant, he worked as a machinist during the day and over the course of couple years he built 3 houses after work to have as rental properties. The depression hit, and then one of his tenants was caught making moonshine in the rental. The feds padlocked the house (for a year?), he couldn't pay the taxes and lost all three properties.
He did get tipped off that there was a run on the banks though, and he withdrew what money he had at the time. He put it (gold I think, this was before the ban on private ownership) in a pickle jar and that became part of a stone fireplace (that is, it was cemented in and had a layer of concrete covering it). In 1945, they broke through the concrete and used the money as a down payment on a farm (still in the family).
As far as debt being good, only if they can't take something of value from you. As a child, I remember going visiting a neighbor who did not own their farm, they were renting it from a landlord. It is a beautiful, amazing and extraordinarily valuable piece of property - Fairlee Farm, it has frontage on both the Chesapeake bay and Fairlee creek. It and a bunch of other farms were owned by the person who owned the local lumber company. He had sold barns to many farmers on credit before the depression. When the depression hit, they lost their farm for the price of a barn.
posted by 445supermag at 2:16 PM on November 19, 2016 [7 favorites]
He did get tipped off that there was a run on the banks though, and he withdrew what money he had at the time. He put it (gold I think, this was before the ban on private ownership) in a pickle jar and that became part of a stone fireplace (that is, it was cemented in and had a layer of concrete covering it). In 1945, they broke through the concrete and used the money as a down payment on a farm (still in the family).
As far as debt being good, only if they can't take something of value from you. As a child, I remember going visiting a neighbor who did not own their farm, they were renting it from a landlord. It is a beautiful, amazing and extraordinarily valuable piece of property - Fairlee Farm, it has frontage on both the Chesapeake bay and Fairlee creek. It and a bunch of other farms were owned by the person who owned the local lumber company. He had sold barns to many farmers on credit before the depression. When the depression hit, they lost their farm for the price of a barn.
posted by 445supermag at 2:16 PM on November 19, 2016 [7 favorites]
My mom lived though the depression and something that comes up over and over is what their job was. She'd say how some families had money because the father had a steady job. People that had a job with the city or state (cop, fireman, etc), or worked for the railroad, etc were fine. Nothing changed for them. I think having an essential type job is ideal.
(My grandfather got a job with the WPA, only if he could get a pair of boots. He went to the local relief office and asked for a loan for 4 dollars for the boots but he'd have to go on relief so he said no. They sold some things and he got the boots.)
posted by ReluctantViking at 2:17 PM on November 19, 2016 [1 favorite]
(My grandfather got a job with the WPA, only if he could get a pair of boots. He went to the local relief office and asked for a loan for 4 dollars for the boots but he'd have to go on relief so he said no. They sold some things and he got the boots.)
posted by ReluctantViking at 2:17 PM on November 19, 2016 [1 favorite]
Best answer: Invest in making yourself employable. If your nonprofit relies on donor funding, the recession hits hard because the stock market goes down and donors don't have as much money to be giving away. If your nonprofit is government funded, in a recession funding sources (especially tax revenue goes down and demand for services goes up). So, if you get laid off, what can you do now to position yourself for a job in a more robust sector of the economy? Maybe take that web design class? Maybe develop some skills or work experience on the side that could translate into a second source of income or a new career?
Second, whatever you can do lower your cost of living is double win- first lets you save more money now and second it means that you won't need as much to live on if you lose your job.
Third, keep a hefty amount (as much as six months of living expenses) in safe, fairly liquid investments. This could be money earmarked for your future house - it can do double duty as a safety net for now.
posted by metahawk at 2:39 PM on November 19, 2016 [5 favorites]
Second, whatever you can do lower your cost of living is double win- first lets you save more money now and second it means that you won't need as much to live on if you lose your job.
Third, keep a hefty amount (as much as six months of living expenses) in safe, fairly liquid investments. This could be money earmarked for your future house - it can do double duty as a safety net for now.
posted by metahawk at 2:39 PM on November 19, 2016 [5 favorites]
The last thing you want to do is pay off debt.
As stated elsewhere here, any debt that can propel you into bankruptcy or seizure during a recession is going to be problematic. This includes student loan debt. While having cash reserves is paramount - and I feel that I stressed that - those who don't owe debtors while retaining a high credit rating have a remarkable amount of flexibility during a recession.
posted by I EAT TAPAS at 3:05 PM on November 19, 2016 [6 favorites]
As stated elsewhere here, any debt that can propel you into bankruptcy or seizure during a recession is going to be problematic. This includes student loan debt. While having cash reserves is paramount - and I feel that I stressed that - those who don't owe debtors while retaining a high credit rating have a remarkable amount of flexibility during a recession.
posted by I EAT TAPAS at 3:05 PM on November 19, 2016 [6 favorites]
Best answer: Minimize all debt, tighten those belts, reassess what you consider non-essential.
Pad your rainy day fund in advance. Have at least 3 months of current expenses in an easily-available account. Do not run up credit cards.
If you set yourself up to be okay for 3-6 months, with a reserve fund, and a recession happens, sink some money into a stock market index fund if you can. The market always recovers, your investments at low points will always bring returns.
posted by erst at 3:11 PM on November 19, 2016
Pad your rainy day fund in advance. Have at least 3 months of current expenses in an easily-available account. Do not run up credit cards.
If you set yourself up to be okay for 3-6 months, with a reserve fund, and a recession happens, sink some money into a stock market index fund if you can. The market always recovers, your investments at low points will always bring returns.
posted by erst at 3:11 PM on November 19, 2016
Get into a funded grad school program if that's on your horizon at all.
Invest emotionally in your community. Volunteering, potlucks, that sort of thing.
posted by aniola at 3:29 PM on November 19, 2016 [6 favorites]
Invest emotionally in your community. Volunteering, potlucks, that sort of thing.
posted by aniola at 3:29 PM on November 19, 2016 [6 favorites]
open a funeral home or liquor store, per grandma florence, depression survivor.
posted by j_curiouser at 3:29 PM on November 19, 2016 [16 favorites]
posted by j_curiouser at 3:29 PM on November 19, 2016 [16 favorites]
i don't know if you can do this in the states, but here in chile it's possible to invest in index-linked savings accounts. i guess maybe deflation is more of a risk there? but here inflation tends to be the worry and there was a time during the last crisis when i made more (or rather, lost less) on my index linked account than anything else.
posted by andrewcooke at 3:33 PM on November 19, 2016 [1 favorite]
posted by andrewcooke at 3:33 PM on November 19, 2016 [1 favorite]
If you have investments, you could move into 'vice stocks' / 'sin stocks' - they tend to do better than mean during tough times.
For even-less-good scenarios, invest in skills for yourself be it how to fix stuff or learning advanced first aid. Around here St. John's Ambulance and the Red Cross offer courses and certification.
I've recommended that my work send everybody who wants to, to take courses and get certification - and we're going to do that once our financials are a little better.
Learning basic electrical stuff (like, how to hook up photovoltaic panels to inverters and set up banks of lead-acid batteries - and how to replenish run-down lead-acid batteries - or even better, how to build and wire up generator coils and adapting wind/water/animal/human power to drive them) is another useful skill. If energy security fails (blackouts, rolling brownouts), being able to offer juice would be very useful. Just setting up a semi-off-the-shelf system for yourself or someone else is a good exercise. Lots of great web resources available.
Semi-facetiously in the vein of investing in skills (and equipment) - learn how to brew (and how to distill if that's legal where you are) could be a useful fallback in case things get really bad.
*edit: If you don't already know how to cook/bake/BBQ, those are all useful skills regardless.
aniola has a great point, even if times get better, being more invested in a community (and have the community be invested in you) is always a good idea. Facetiously, I'm kind of glad that one of my coworkers is a gun nut and he know that I'd have his back.
If you have the time and the resources, depending on if you're in a legal medical/recreational marijuana (Cannabis) State, you can apply to the State to be a personal grower (jurisdictionally dependent) for other people/person with license(s) to possess/use - skills, equipment, community.
Me? I can make and purify antibiotics. With a little electricity and equipment/improvised-equipment, I could plausibly make and purify tetracycline, and maybe others, from scratch (essentially just equipment from an advanced undergraduate biology wet lab and dirt; purifying on a 'boutique' scale could be done by a well equipped undergraduate chemistry wet lab).
posted by porpoise at 4:56 PM on November 19, 2016 [7 favorites]
For even-less-good scenarios, invest in skills for yourself be it how to fix stuff or learning advanced first aid. Around here St. John's Ambulance and the Red Cross offer courses and certification.
I've recommended that my work send everybody who wants to, to take courses and get certification - and we're going to do that once our financials are a little better.
Learning basic electrical stuff (like, how to hook up photovoltaic panels to inverters and set up banks of lead-acid batteries - and how to replenish run-down lead-acid batteries - or even better, how to build and wire up generator coils and adapting wind/water/animal/human power to drive them) is another useful skill. If energy security fails (blackouts, rolling brownouts), being able to offer juice would be very useful. Just setting up a semi-off-the-shelf system for yourself or someone else is a good exercise. Lots of great web resources available.
Semi-facetiously in the vein of investing in skills (and equipment) - learn how to brew (and how to distill if that's legal where you are) could be a useful fallback in case things get really bad.
*edit: If you don't already know how to cook/bake/BBQ, those are all useful skills regardless.
aniola has a great point, even if times get better, being more invested in a community (and have the community be invested in you) is always a good idea. Facetiously, I'm kind of glad that one of my coworkers is a gun nut and he know that I'd have his back.
If you have the time and the resources, depending on if you're in a legal medical/recreational marijuana (Cannabis) State, you can apply to the State to be a personal grower (jurisdictionally dependent) for other people/person with license(s) to possess/use - skills, equipment, community.
Me? I can make and purify antibiotics. With a little electricity and equipment/improvised-equipment, I could plausibly make and purify tetracycline, and maybe others, from scratch (essentially just equipment from an advanced undergraduate biology wet lab and dirt; purifying on a 'boutique' scale could be done by a well equipped undergraduate chemistry wet lab).
posted by porpoise at 4:56 PM on November 19, 2016 [7 favorites]
Make friends and put in a vegetable garden. Cash is useless if there's hyperinflation.
posted by scruss at 6:13 PM on November 19, 2016 [2 favorites]
posted by scruss at 6:13 PM on November 19, 2016 [2 favorites]
Don't buy a house, and don't try to sell your house if you already own.
Live close to the ground. Don't take big risks like quitting your job for a career change that isn't a sure bet. Don't over-extend yourself financially. If you have savings, don't use them for unnecessary projects. (Usually I'm the first one to say that savings are what buying a car or traveling or renovating are for, but not if you're Trumpday Prepping.) Don't start a business that would require a large upfront cash outlay.
Further, adapt your lifestyle to be more modest if you haven't already. Have game nights at home rather than going out. Learn to cook well. Establish a social circle that lives nearby and likes simple fun. Get a library card. Buy a bike.
posted by Sara C. at 6:46 PM on November 19, 2016 [3 favorites]
Live close to the ground. Don't take big risks like quitting your job for a career change that isn't a sure bet. Don't over-extend yourself financially. If you have savings, don't use them for unnecessary projects. (Usually I'm the first one to say that savings are what buying a car or traveling or renovating are for, but not if you're Trumpday Prepping.) Don't start a business that would require a large upfront cash outlay.
Further, adapt your lifestyle to be more modest if you haven't already. Have game nights at home rather than going out. Learn to cook well. Establish a social circle that lives nearby and likes simple fun. Get a library card. Buy a bike.
posted by Sara C. at 6:46 PM on November 19, 2016 [3 favorites]
The last thing you want to do is pay off debt.
I disagree. Instead, get completely out of debt and pile up cash. Throw away the credit cards - you won't need the added stress of creditors chasing you if the economy tanks.
posted by summerstorm at 8:56 PM on November 19, 2016 [1 favorite]
I disagree. Instead, get completely out of debt and pile up cash. Throw away the credit cards - you won't need the added stress of creditors chasing you if the economy tanks.
posted by summerstorm at 8:56 PM on November 19, 2016 [1 favorite]
Best answer: GO TO THE DENTIST NOW, I can't stress this enough, you don't want to find out you've got dental problems starting right after losing a job or insurance. If you still have your wisdom teeth, get them done now, when things go wrong there they can go wrong fast and you don't want to be uninsured and delaying treatment on an infection that close to your brain. Go make sure you're up-to-date on things like your tetanus jab now. Get your flu shot if you haven't already. If you have even the slightest idea that you might be at risk for something like heart disease or diabetes, see a doctor and find out exactly where you stand on those things. If you have health problems that require ongoing maintenance, figure out what you'd do for that if you lost your insurance today. If you know you aren't eating well and exercising moderately now, start. If you have mental health issues that aren't adequately controlled, start working on that aggressively. If you wear glasses or contacts, make sure you have an up-to-date prescription and at least one spare pair of glasses with your current prescription.
These are all good things to do generally, but they're the sort of problems that will seriously compound any issues you find yourself with in other parts of your life, especially as far as employment goes. Financially, bankruptcy sucks but is not the end of the world. You can declare bankruptcy on your medical expenses, but you can't get that same kind of fresh start for your health itself, and lack of money or insurance could impede your ability to get care for a lot of this stuff in future.
posted by Sequence at 11:41 PM on November 19, 2016 [8 favorites]
These are all good things to do generally, but they're the sort of problems that will seriously compound any issues you find yourself with in other parts of your life, especially as far as employment goes. Financially, bankruptcy sucks but is not the end of the world. You can declare bankruptcy on your medical expenses, but you can't get that same kind of fresh start for your health itself, and lack of money or insurance could impede your ability to get care for a lot of this stuff in future.
posted by Sequence at 11:41 PM on November 19, 2016 [8 favorites]
As some people have said, build community. Not only with your neighbors, but if you haven't been friendly with family (parents, siblings, cousins) recently, give them a call, so if you need a favor or a place to stay during bad times, they'll be amenable (of course, that goes both ways).
When you're making monetary choices (Should I buy a bicycle? Should I buy a big-screen TV? Should I move to a cheaper apartment?) ask yourself what you'll be thinking about your decision 5 years from now, in the middle of a recession. Spending less money generally makes sense, but if you'll get something that lasts you a while and saves you money in the end, spending more money can be good too.
posted by mistersix at 1:06 AM on November 20, 2016
When you're making monetary choices (Should I buy a bicycle? Should I buy a big-screen TV? Should I move to a cheaper apartment?) ask yourself what you'll be thinking about your decision 5 years from now, in the middle of a recession. Spending less money generally makes sense, but if you'll get something that lasts you a while and saves you money in the end, spending more money can be good too.
posted by mistersix at 1:06 AM on November 20, 2016
Best answer: Housing markets and stock markets are driven by emotion, so anxiety and worry are your enemy. You cannot predict what other people will do, so the best you can do is live your life now as you mean to go on, in calmness and practicality.
Maintain a balanced and diversified investment portfolio and take the long view; never panic-sell into a falling market. Never underestimate the power of compound interest, for good or ill. Don't carry a balance on credit cards. Don't buy depreciating assets on credit unless you can sell the asset for what you owe on it at any time. If you have an expensive hobby, make it pay for itself. Live within your means. Learn to knit, because the ability to conjure warm socks out of a ball of fuzzy string is a valuable life skill.
posted by Mary Ellen Carter at 5:53 AM on November 20, 2016 [2 favorites]
Maintain a balanced and diversified investment portfolio and take the long view; never panic-sell into a falling market. Never underestimate the power of compound interest, for good or ill. Don't carry a balance on credit cards. Don't buy depreciating assets on credit unless you can sell the asset for what you owe on it at any time. If you have an expensive hobby, make it pay for itself. Live within your means. Learn to knit, because the ability to conjure warm socks out of a ball of fuzzy string is a valuable life skill.
posted by Mary Ellen Carter at 5:53 AM on November 20, 2016 [2 favorites]
Mortgage/debt: refinance to longer terms, so long as the interest rate can be kept similar or lowered. This gives you an option to reduce monthly non-discretionary spending which can be critical in a bad economy; and you can just make extra principal payments if things remain okay.
Emergency fund: larger than usual, with more of it kept as actual physical cash.
Investments: be less aggressive and more diversified than usual.
Possessions: clean the house and eBay/sell things you don't really want anyway. They'll sell for more during a good economy than a bad one, and can help pad your emergency fund.
posted by whisk(e)y neat at 2:31 PM on November 20, 2016
Emergency fund: larger than usual, with more of it kept as actual physical cash.
Investments: be less aggressive and more diversified than usual.
Possessions: clean the house and eBay/sell things you don't really want anyway. They'll sell for more during a good economy than a bad one, and can help pad your emergency fund.
posted by whisk(e)y neat at 2:31 PM on November 20, 2016
Think extra hard about making big purchases that require borrowing money. Increase your rainy-day fund. Consider refinancing if you have an ARM or some other type of externally-pegged financing arrangement (any loan with a variable rate), but probably not otherwise. Don't do anything financially sketchy. Be very suspicious of people selling weird products (whether it's CDOs or gold coins or annuities). Look extra hard at anyone or anything that claims to outperform the market.
Don't panic. If you're prone to panicky behavior, don't sit around listening to the financial news in times of high volatility. Don't let the market's movements trick you into making decisions based on thin information or with less consideration than necessary.
Make sure you've followed the usual best-practice advice about diversification and you have your savings in the appropriate places for your investment horizon and risk tolerance.
For most people it's not really a matter of doing anything, it's really about not doing anything out of panic.
posted by Kadin2048 at 6:48 PM on November 20, 2016
Don't panic. If you're prone to panicky behavior, don't sit around listening to the financial news in times of high volatility. Don't let the market's movements trick you into making decisions based on thin information or with less consideration than necessary.
Make sure you've followed the usual best-practice advice about diversification and you have your savings in the appropriate places for your investment horizon and risk tolerance.
For most people it's not really a matter of doing anything, it's really about not doing anything out of panic.
posted by Kadin2048 at 6:48 PM on November 20, 2016
Paying down long-term debt when the interest rates are really, really low... is a weird plan.
Right now, interest rates are still near their all-time lowest values ever. If you have debt, refinance it. Pile up cash *instead* of paying back low-interest loans, so you have both a buffer, and you have a hell of a cheap loan when/if interest rates go back up.
For fixed-rate loans, this is the best deal there will ever be. For adjustable-rate loans, wow, that's some gamblin'.
That said, never run a balance on a credit card; that's not long-term debt, that's just (heavily) overpaying to have money a month early.
Otherwise, you said you worked for a nonprofit. How stable is their funding?
posted by talldean at 9:22 PM on November 20, 2016
Right now, interest rates are still near their all-time lowest values ever. If you have debt, refinance it. Pile up cash *instead* of paying back low-interest loans, so you have both a buffer, and you have a hell of a cheap loan when/if interest rates go back up.
For fixed-rate loans, this is the best deal there will ever be. For adjustable-rate loans, wow, that's some gamblin'.
That said, never run a balance on a credit card; that's not long-term debt, that's just (heavily) overpaying to have money a month early.
Otherwise, you said you worked for a nonprofit. How stable is their funding?
posted by talldean at 9:22 PM on November 20, 2016
I think it depends on what negative outcome you're trying to avoid. I put pretty much all my non-retirement savings, around $3000, into the stock market (index funds) in May of 2008. In retrospect, this was a pretty terrible decision - by the end of the year my precious investment was worth like $1400, less than half what I'd put in. On the "fuck everything!" principle I just left that money invested as it was and a couple years later it was back to where I started from and a couple of years after that it was worth twice as much as my initial investment.
I really couldn't have invested at a worse time, but I still came out all right long-term. Obviously if I had needed that money in the meantime it would have sucked, but I had a stable job (well, one stable job and then another job) with health insurance, a rent payment that, while kind of high, was not so bad that I had to live paycheck-to-paycheck, and a pretty simple life overall (no dependents, for one thing).
One thing you can do in any environment, though, is live RADICALLY within your means. Meaning: spend as little as possible, especially on non-negotiable expenses like housing and car expenses/transport payments/things that lock you into contracts. Obviously this is not easy, but if you think about it, in your city there are probably people who make significantly less money than you do. How would you live if you were them?
posted by mskyle at 6:32 AM on November 21, 2016
I really couldn't have invested at a worse time, but I still came out all right long-term. Obviously if I had needed that money in the meantime it would have sucked, but I had a stable job (well, one stable job and then another job) with health insurance, a rent payment that, while kind of high, was not so bad that I had to live paycheck-to-paycheck, and a pretty simple life overall (no dependents, for one thing).
One thing you can do in any environment, though, is live RADICALLY within your means. Meaning: spend as little as possible, especially on non-negotiable expenses like housing and car expenses/transport payments/things that lock you into contracts. Obviously this is not easy, but if you think about it, in your city there are probably people who make significantly less money than you do. How would you live if you were them?
posted by mskyle at 6:32 AM on November 21, 2016
Regarding investment advice, I think it makes sense to generally be more diversified and less aggressive than you might otherwise be, but be wary of any advice that you should sell off investments now so that you have a ton of cash to then invest after the market crashes. If you're Joe Regular Investor, prices in our markets are set by investors and algorithms that are better at investing than you are and have much more information than you have, and they have a hard time timing the markets. You'll do it worse than they will.
I think the focus-on-your-community answers here are great. Look for neighborhood associations as well.
posted by craven_morhead at 12:02 PM on November 21, 2016
I think the focus-on-your-community answers here are great. Look for neighborhood associations as well.
posted by craven_morhead at 12:02 PM on November 21, 2016
Another thing that occurs to me: ask for credit limit increases on your credit cards, before the banks get stingy with them in a recession. A higher credit limit on a card that offers 0% balance transfers/convenience checks (though with 2-4% initial fees) could translate to a year-long loan when you need it most. Have multiple credit cards so you can transfer balances between them, making it a multi-year loan.
If you don't get offers for 0% convenience checks, figure out how to improve your credit rating. Tip: charge things you would normally pay cash for.
posted by mistersix at 3:07 AM on December 5, 2016
If you don't get offers for 0% convenience checks, figure out how to improve your credit rating. Tip: charge things you would normally pay cash for.
posted by mistersix at 3:07 AM on December 5, 2016
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we turned out fine, but I think we both felt a lot less anxiety about things when the collapse happened because we'd optimized our situation and had a plan.
posted by supermedusa at 12:50 PM on November 19, 2016 [5 favorites]