What Are the Benefits of an Economic Recession?
By Steve Gillman
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
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
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.
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
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