Benefits of a Recession

Would you believe that there are benefits to a recession? Yes there are and by knowing what they are, you can take advantage of them.

First, when the economy is in recession, you will soon get a fat check from the Internal Revenue Service or IRS amounting to $300 or $1,200. Why does the government issue it? This is the government’s way to help the economy. If you have not received yours yet, you will probably get it next year.

As a result of the recession, majority of the bonds and stocks are undervalued. This means you can buy these at reasonable prices. Just make sure you do some research first because you only want to buy those that have a good return when the economy recovers. You should also look into buying some property given that their value is also low.

Since you are a consumer, you will also get tax breaks. What happens here is that you don’t have to pay that much income tax this year as a direct result of a deduction for private mortgage insurance which happens to be an extension of the sales tax write-off and also a boost in the alternative minimum tax exemption amount.

Aside from the Internal Revenue Service, the Federal Reserve also does its share to help the economy by slashing interest rates. This means you can borrow money at a lower rate as long as you have good credit ratings.

For those who are employed, a recession increases your retirement account limits. This can be done by using your rebate check to turbocharge your retirement savings and investing this in a Roth or Traditional IRA. There are some people who have decided to invest it in both.

If ever your gross income is $100,000 and below, you can now roll over your 401(k) directly into a Roth IRA without having your funds go through a Rollover Traditional IRA first. But if your income is above $100,000, you will have to wait until 2010 when that income limit disappears so that you too can invest this into your retirement account.

The environment also gets benefits from a recession. How? By making people make reductions in their expenses. For instance, car owners will trade their SUV’s for smaller vehicles and people are less likely to travel for vacation. As a result, it will reduce the number of carbon gases that are released into the atmosphere.

This will also help boost online businesses since people will order items instead of driving over to the mall and make the roads less congested so there will be fewer traffic jams.

For those who want a career boost, this is the best time to go back to school since no one is hiring. Take a course that will enable you to switch to a better career or get an MBA. The current recession is not expected to go away this year or even the first half of 2009 so weigh your educational options.

Indeed, there are benefits to a recession but most of us don’t see it because of how the media depicts it as a very bad thing. Now that you know that it is not entirely true, you just have to make the most of it until things do improve.

Your Business Can Survive a Recession

When there is a drought, most farmers pray for rain. Will that make rain pour from the heavens? No and the same thing will happen when you are stuck in a rut during a recession. You just have to wither out the storm because this is the only way you business will stay afloat.

No matter if your business is small or large, marketing is the best way to get your message across to the people. During a recession, you have to make cuts in the budget and instead of spending more on advertising, it is best to use this money in retraining your staff because customer service is key when you want to set yourself apart from the competition.

Cuts should also be done in terms of how much you get from the business and if you are the owner, the best way to do that will be to lower the profit margins until such time that you can put them to normal levels.

By doing that you are able to satisfy the most important person you will ever meet in your business and that is the customer. Another solution will be to offer sales and discounts as this ensures their loyalty.

If you have to answer to shareholders, tell the situation even if they already have an idea how things are. You just have to reassure them that things will improve. After all, a recession is cyclical so they will soon get a return on their investment.

During a recession, a lot of businesses will retrench their workers and close down several offices. If you are a gambler, this is the best time to buy new equipment and try to take a larger share of the market. If you decide to do this, make sure you get a fixed rate so won’t have a problem paying for these goods.

You might think that most banks are not willing to lend people money but thanks to the bailout, you are able to do so. You just have to tell the bank what steps you are taking during the recession so they know what you are doing and understand that the steps you are taking are for the long term.

Should business be really tough and cutting expenses be not enough to help your business stay afloat, you should be prepared to let some people go. When you do this, make sure you are only dismissing employees who can easily be replaced when the crisis is almost over.

If you want to reach out other customers, create a website so you can offer your products or services to other towns, states or even countries.

When you get to have your own business, you are at helm. No one is going to tell you what to do and you are expected to be the one to set the direction. If you have doubts as to what you can do to survive a recession, don’t be afraid to ask other owners what steps they have taken. Sharing this information is beneficial to both because no one wants to throw in the towel.

A recession affects everyone and it does not matter if you are employed or you are running your own business. How badly things get depends entirely on your financial situation so you just have asses it first before taking any appropriate action.

Are We in Recession

Are we in recession? That may be a stupid question to ask now but yes we have been for more than 2 consecutive quarters.

What makes this recession difference from the one we experienced in 2000 is the fact that there were a lot of factors which were never there before. Eight years ago, this was attributed to the collapse of the dot-com bubble, the September 11 attacks and the accounting scandal.

This time around, we can blame it on high oil prices, global inflation, a credit crisis which lead to the bankruptcy of some of the most established banks, increased unemployment, and the housing crisis.

So what do you we see? There are a lot of employees who are jobless, people are forced to sell or foreclose their homes, credit markets are frozen making it impossible for businesses and consumers to get a loan and government intervention is needed to try and prevent things from getting worse.

Just this month, the president together with the help of congress and the senate signed into law the $700 billion bailout plan that will ensure tax breaks for businesses as well as those who invest in alternative energy, increase the limit of insured bank deposits and allow the government to take over huge amounts of devalued assets from beleaguered financial companies.

When this was first voted on by congress, this was shut down but when it was approved by the senate, congress changed its mind making it the largest government intervention in the financial market since the great Depression.

Do we see the fruits of the bailout? Not yet because it will take time. Because of everything that is happening in the US, it has affected countries in Asia and Europe as well. Just to give you an idea, stock markets in the world have gone down.

On the 10th of October, the DOW plunged 697 points falling below 7,900 points. It’s lowest since March of 2003. The NASDAQ and S&P hit more than 5 year lows before recovering. What happens this week is anybody’s guess but hopefully, it won’t fall that hard again.

Because of the US market’s volatility, it has forced finance ministers from the group of 7 nations to find different ways to deal with the crisis and get money flowing again. In most cases, the central banks in these countries have decided to flood the market with liquidity. Though this may sound like a good idea, some experts say this will backfire because banks are hoarding the cash and the market will be driven by fear.

The only consolation perhaps that anyone can see in the recession is the price of oil. During the first half of this year, crude oil was more than $100 per barrel and now it is less than $75 per barrel. This could even go lower as the slowing global economy will hurt demand.

A recession no matter how you look at it is inevitable because it is part of the business cycle. In any country, there is a time that the economy expands, slows down, experiences a recession and then recovers.

It may take years for it to happen again and as history has shown, different factors caused the recession to occur. The challenge is how countries address the problem so we will never have to encounter another Great Depression.

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