by Karen Jones

Created on: February 15, 2009

There is no doubt that the world economy has taken a battering since the tail end of 2008, there is also a certainty that there will be a recovery in the not too distant future. Financial institutions and the stock markets have come close to collapse owing to malpractice and poor management, but is this all doom and gloom? How does it affect the average person

Media coverage has ensured that we all receive a blow-by-blow account of the struggles within the banking system and government bail-outs, but how many of us have lost our money? Very few, owing to the deposit guarantees that are currently in place in most European countries; those that have lost significant investments are large companies, pension funds and those who have invested in stocks and shares. Losses here will affect the sale of businesses, recruitment, credit ratings and savings held for retirement. Those with substantial savings would be wise to spread their investments widely, taking advantage of government fund guarantees; a safety barrier in case a bank collapses.

House repossessions are on the increase. This can often be avoided by careful budgeting and maintaining discussions with your mortgage lender. It is more favorable for a lender to temporarily receive a reduced monthly payment than having to auction a property in a market place where house prices are falling. Re-mortgaging a property is never the best option - it just increases the debt. If a defaulted mortgage is passed onto a debt-collection agency, the interest on repayments will escalate; therefore it is essential to keep your mortgage lender informed of any financial difficulties that you might be experiencing at a very early stage before the debt is sold on for collection.

Media has led us all to believe that we are in a recession - this causes further cutbacks in spending by people who have no need to do so. No, we are not all likely to lose our jobs. No, we are not about to be hit with escalating bank rates or utility bill charges. No, we are not about to face higher taxes, in fact bank interest rates have been reduced (in the customer's favor), and some taxes have in fact been reduced (such as VAT in the UK). So why are we panicking? There really is no rational reason to do so.

Perhaps there will be job losses within companies; this can be an opportunity to change career or find employment closer to home. Job vacancies are available in most communities, though salary expectations may have to be reassessed. What are you worth to a company? Candidates that have realistic salary expectations will secure employment. Remember - companies cannot trade without staff.

If household budgeting allows for a little 'luxury item' spending such as meals out, new clothes or a holiday it is best to do it. The media frenzy has caused a decline in spending within this sector, which has a knock-on effect on local employment. If we all acted normally, rather than believing that global economy is in an unavoidable downward spiral, the situation will be partly on its way to recovery.

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