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What Are the Benefits of an Economic Recession?

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As you watch the news (this is being written in 2009), you may not have considered the benefits that come with an economic recession. We see growing unemployment and a slowing economy and assume it's all bad news for the country. However, when 10% are unemployed, the other 90% are still earning a living. For that lucky 90% there is good news, as I explain in the following three examples.

A Wealthier Lifestyle Is Possible

We're in a deflationary recession as I write this (early 2009). In general prices are going down, which is very rare, and not likely to last for much longer. In any recession, even when there is general inflation, there are businesses and whole industries that have to drop prices to sell their products, so why not take advantage of this? Consider this: If you have the same income, but you pay less for some - or many - of the things you buy, you can effectively live a wealthier lifestyle.

For the best deals, look to those areas of the economy that have been hit hardest by the recession. The price of some vacation packages have been cut in half, for example. Have you been waiting to get a car? This may be the time. Or you can spend less on necessities, and use this as an opportunity to start setting aside more for the future, or to pay down debt with the money saved.

Cheap Real Estate

The prices of homes and other properties are dropping at the moment, but even in recessions that don't lower prices interest rates often get lower. In either case (and you get both this time) you have an opportunity to spend less for a home or investment property. Refinancing your current home and lowering your payments is another way to take advantage of current rates.

Of course, you might wonder about the loss of value you suffer on your current home, but if you're not moving soon, it may not matter much. In fact, take advantage of it by getting your property taxes lowered based on the new lower value. The value will eventually go up again.

What if you had plans to upgrade to a more expensive home? Well, you'll save more on the new home that has dropped 20% in price than you'll lose on yours. For example, maybe your 150,000 home dropped 20% in value to $120,000, but the home you want used to be $200,000 and now is 20% less, or $160,000. You may lose $30,000 on your current home, but you can save $40,000 on the new one.

Cheap Stocks

Recessions usually drive down the price of stocks in general, and that certainly has been the case this time. That's an opportunity. Of course, nobody can predict with certainty where the stock market will go from here, but you can be sure that if you buy a few good mutual funds when the DOW is at 8,000 you'll be doing better than those who bought near 14,000.

Obviously, if you have a job or business income, there are some real benefits to be found in an economic recession. But what if you've lost your job or have lower business revenue? Hopefully you have unemployment compensation and good friends and family. Meanwhile, try to see it as an opportunity to explore new ways of doing things. You could find your dream job or discover new ways to grow your business even larger than it was. Sometimes going from good times to rough times leads to an even brighter future.



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