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Tips to help you survive economy's downturns

From the January 27, 2008 edition, Tulsa World, Page E1.

By Laurie Winslow. 

Whether we're headed for a recession or not, it never hurts to plan ahead and be prepared.

Pledge to follow some simple guidelines and find yourself headed toward financial stability.

The following suggestions make eternal financial sense, no matter what the economy's status.

Have a "big picture" of your finances

Do you know how much money you have coming in versus how much is going out?

No. 1, track what you spend, especially during difficult economic times, said Mary Thomas, director of education for Credit Counseling Centers of Oklaho ma Inc. And she does mean track everything -- from the piece of gum you buy at the convenience store to the candy bar or soda from the vending machine.

Little things add up, and spending 80 cents five days a week on a candy bar adds up to more than $200 a year. Make a spending plan and know the "who, what, when, where and why" of your spending.

Track money by dividing it into categories: housing, food, transportation, entertainment, savings, and so on.

Thomas said she keeps a pocket notebook -- about the size of a small calculator -- in her car and writes down purchases, including cost, what she bought and the date.

When you write down your purchases and see it in black and white, it makes a difference in how you spend money, Thomas said. You begin to see how much you're spending and can make adjustments.

Maybe you're making too many grocery store trips, or buying too many lottery tickets. Whatever it is, find ways to pare down those things that are keeping you from your financial goals, she said.

Pay down debt

Eliminate as much extraneous debt as possible.

Pay off credit cards.

Don't buy a new car or take on more debt if a recession starts.

"Do all the things that tighten the belt to minimize the cash flow requirement," said James Brock, a Tulsa-based senior financial adviser at Brock and Associates, a financial advisory practice of Ameriprise Financial Services Inc.

If you're really in a lot of credit card debt, it might make more sense to pay that off before putting it into a retirement plan, especially if a recession is looming, said Angela Sowell, of Angela Sowell CPA MBA PC.

Don't obligate yourself to new debt or sign long-term contracts that might obligate you to a high price, she said.

Start an emergency fund

Financial experts recommend having anywhere from three to six months of living expenses saved for emergencies.

Some people would suggest having as much as one or two year's worth of savings set aside for emergencies, although three to six months is satisfactory for most, said Dan Safranek, regional investment officer for Arvest Asset Management in Bartlesville.

"The more bearish you are about the overall situation, the more cash you should have," he added.

Don't rely on credit cards as an emergency fund, Sowell advised.

Find ways to make more cash -- and save

Even after you've tracked your spending and made adjustments, you still may come up short.

Look for ways to make more money. That may mean selling some of your assets -- a boat that is rarely used, jewelry you don't wear, a car that sits in the driveway more than it's driven. Consider getting a part-time job.

To save, start or join a car pool. Make sure your car is in good running condition, that the oil and filters have been changed to save costs, Thomas said.

Organize shopping trips around the location closest to you rather than driving from one end of town to the next. Also, make a shopping list and don't buy anything that isn't on it.

Look for coupons and sales fliers. Often, grocery stores will match what their competitors are doing, Thomas pointed out.

According to a poll conducted by the Consumer Reports National Research Center for ShopSmart magazine, women who use coupons and store-loyalty cards save more than 10 percent a year on groceries, or about $678 a year.

"Focus on making sure that you have your fixed costs managed," Sowell said, and try to reduce some of those expenses.

If you can take advantage of lower interest rates, consider refinancing your mortgage to reduce your monthly payment and switching to a 15-year from a 30-year loan, Sowell added.

Keep networking

Be aware of what's going on in the economy by reading the newspaper. Pay attention to indicators such as the unemployment rate, stock market and interest rates, all of which can signal the economy's direction.

Always keep networking, because the more people you know, the easier it might be to find another job if you lose your current one, Sowell said.

The American Institute of Certified Public Accountants advises that you protect your job by making yourself more valuable to your employer. Raise your profile at work, and make sure your boss knows your value.

"Make it a point to work on the best and most high-profile projects. Transition yourself to areas of the company that drive revenue and future growth opportunities," says an e-mail from the CPA organization.

Seek credit counseling

Don't wait until you're three or four months behind in payments before seeking help, Thomas advised. Get help immediately before things get out of control.

Consumer Credit Counseling Service, which can provide counseling over the phone, is open six days a week. Walk-ins are welcome. Meetings are confidential.

Thomas recommends calling to arrange appointments because they can last up to 90 minutes.

Defining a downturn Definitions of many economic terms vary, but here are some traditional explanations.

Depression: An economic downturn where gross domestic product declines by more than 10 percent.

Bull market: A stock market that is steadily rising, or charging like a bull.

Recession: A contraction of economic activity and employment lasting at least six months, but less severe than a depression.

Bear market: A stock market that declines 15 percent to 20 percent, and is persistently sluggish, like a hibernating bear.

Correction: A drop of 10 percent in the stock market.

Sources; Associated Press, Motley Fool, Ask.com, "Stock Market Basics."

Credit: LAURIE WINSLOW World Staff Writer