The tickers are down and the unemployment rate is high. Welcome to the recession. But just because things are looking grim, it doesn't mean that you can't boost your savings and net worth during a down economy.
First, if you haven't done so already, take a look at your current spending. It is important during difficult economic times to be wary of the unnecessary expenses that bog down our budgets. The first on my list to go was extended television programming. This may or may not be something you are willing to give up, but every expenditure should be closely examined. Those that don't make the cut of absolutely necessary should be excluded from your recession budget. This will give you more money to invest each month and will reduce your expense footprint if you are faced with a job loss, which will be less of a drain on your liquid resources while you look for another.
The second piece of advice for managing your assets and investments during a recession is to keep a guarded approach to investing. While some investments will prove very profitable in the long run, you may stand to lose a significant amount of your worth if you are forced into taking a short position due to the loss of a job. A certain level of liquidity will help to balance the benefit to risk ratio and will help ward off premature selling of invested assets.
The standard position to wise investing during a recession is the long position, meaning that you hold on to your investments until the market turns from Bear to Bull. There is still money to be made from short positions, but therein lies more risk. Bear markets are much more prone to panic and you may find that your 'sure thing' got performance anxiety due to market sentiment. However, investments in essential products during down trends is generally a safer arena. But what do people consider essential?
When you looked at your budget and whittled away the excess, what did you cut? What did you keep? You're probably still paying your utilities, right? That's a safe place to start. Were there any vices you just couldn't bring yourself to cut? Maybe a pack of smokes or two a day? While not the most economically or health-consciously wise decision, most smokers don't cut the habit just because money is tight and prices are high. If this doesn't go against your moral code, investing in recession-proof vices or "sin stocks" is generally an economically sound principle.
What other options do you have for investing during a recession? What sectors are hurting the worst right now, and thus more likely to offer greater financial gain in the years to come? The housing market, right? And what caused us to be in this mess in the first place? Banks offered people loans who shouldn't have gotten them, interest-only loans at that. And what kind of homes were these people purchasing? Were they buying the older starter homes like first time home buyers of generations past? Not the majority. The latest real estate boom was focused on new housing development, inflating the cost of both residential and commercial zoned properties: residential to build the homes and commercial to provide the 'essentials' to those new neighborhoods. So it stands to reason that since this market has crashed, prices are starting to come down.
What do they say about buying land? Oh yes, "They aren't making any more of it." And who sells land during a recession? Typically, it would be the desperate, but you will also find that some people are still trying to sell parcels of residential, commercial, and recreation property at still-inflated prices. Some of them actually get away with it. Why? Because potential buyers fail to do their research and account for the economic down-trend. An excited investor is seldom a savvy investor. Keep that in mind.
The basic principle for building your net worth during a recession is to think smart, cut away your excess spending, and look for opportunities. But don't stretch yourself too thin. You always want to keep that backup of liquidity, just in case. If you are unfortunate enough to lose your job, you might consider your talents and abilities and think about going into business for yourself. Can you fill a niche? Once you open your mind to the possibilities and couple that with research and hard effort, you too can profit from the down market.