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Recession Opportunities



I have been getting questions about the recession and whether it presents us with some 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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