Recession Opportunities - Questions and Answers
I have been getting questions about recession opportunities
from subscribers to the Unusual Ways (To make and Save Money)
Newsletter. Here are some of the more common ones, along with
my replies.
Q: You say that there are always opportunities in a recession.
Can you give a couple examples?
A: At the moment the stock market is about 45% higher than
it was six months ago. Obviously there was a great opportunity
to make some money there. Stock markets typically go down during
recessions and then rise substantially before the recession
ends.
Q: What about recession opportunities for those of us who
don't have much money to invest?
A: There are two great opportunities for those who are not
interested in or able to invest much yet. The first is for all
who are renting. Not only have home prices dropped by almost
40% in many parts of the country, but as is common in a recession,
interest rates have fallen. This may be a perfect time to start
looking for a house to buy. And contrary to the impression given
in the news, loans are still available for those without a large
down payment. FHA loans, for example can still be obtained with
just 3.5% down.
Not only that, but if you haven't owned a home in the last
three years, you can get $8,000 from the government in the form
of a tax credit (as of summer 2009). We recently sold a $72,000
house to a woman who used one of these low-down programs and
I believe she also qualified for the $8,000 credit, which knocked
more than 10% off the price. Her monthly cost is less than rent
would be.
The second great recession opportunity for those without much
money is to start saving some. This is made possible by the fat
that things are on sale everywhere and prices have either stopped
going up for the moment or actually dropped for many items. Find
those deals and set aside the money you save for future investing
or a home.
One thing that is often forgotten about recessions and depressions
is that as bad as they get most people are still working. Consider
the Great Depression of the 1930s. Although 24% of people were
unemployed at one point, that meant the other 76% were working
while prices fell. That spells opportunity for them, doesn't
it?
Q: What about those who have lost their jobs?
A: It can be terribly stressful to lose your income, but here
too there are opportunities if you have the right approach. If
you can collect unemployment compensation for a year, and you
prepared a bit so that you are able to live on that, you can
have the time to start a small low-investment business (there
are many mentioned on this website and in the newsletter that
can be started for little or nothing).
Sometimes the best thing that happens to a person is the loss
of a job. Not only is it a chance to start a business, but it
might lead to finding a better job. More than a few people have
discovered what they really want to do after being fired or laid
off.
Q: Are there specific business opportunities to look for
during a recession?
A: There are some businesses that do better during tough economic
times. A friend of mine is selling more paddle boat parts than
ever, for example, because parks are repairing their fleets rather
than buying new ones. But if you are already in business, there
are two more important recession opportunities.
The first is to the chance to gain market share. It is perhaps
sad that some businesses are not strong enough to survive in
this environment, but that means those that remain in an industry
will gain the business those failed companies lose. Look for
how to survive and if you don;t do better now you'll almost certainly
see profits rise quickly as the recovery begins.
The second opportunity is to learn how to run more efficiently.
We may not like this necessity being thrust upon us, but if you
learn how to cut expenses and market more effectively at a lower
cost, you'll not only survive, but thrive. Again you are positioning
yourself to do great when the recession ends. For example, a
small business that is losing money might cut it's overhead by
$30,000 per year just to get back to breaking even, but when
business picks up that will mean $30,000 extra profit every year.
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