A Recession Handbook, Newsweek

A Recession Handbook

By LINDA STERN
Published: Januar 29, 2008

 
 LET BEN BERNANKE WORRY ABOUT THE 
 world—you worry about your wallet.
 Some economists are predicting the first U.S. recession since 2001's slide, when the stock market dropped as much as 30 percent, personal income fell sharply and more than 2 million jobs disappeared. It's nice that Washington wants to throw some stimulus your way, but don't bet everything on that $600-per-taxpayer check. Here's how to protect yourself from bad times.
 Protect your job. Stay visibly busy, says New York headhunter Stephen Viscusi. The first employees to go during a recession are the high-maintenance slackers. Come in early, leave late, eat lunch at your desk and try to figure out how you can make your boss's life easier and more profitable. Update your résumé with all your current skills and accomplishments, even if you're not planning on job hunting. You can post that résumé, absent your current employer's name, at online job sites like Monster.com, just to see what else is out there. If you're ready for a change, Vault.com reports that health-care and sales careers are the most promising and protected during downturns.
 Protect your portfolio. It's a little too late to sell off your stocks: now you stand a good chance of selling low and then trying to buy high later. So stick with your plan, and use Wall Street's dismal days to cherry-pick bargain stocks for the next expansion. It always comes, says Sam Stovall of Standard & Poor's, who points out that most bear markets recover in less than a year. Which stocks do best when the economy is at its worst? Alcohol, tobacco, health care, gaming, utilities and consumer necessities. S&P is recommending Budweiser, Colgate-Palmolive, LabCorp of America and Altria as some promising picks.
 Don't rush into bonds, and be especially wary of bond mutual funds, counsels financial planner Sheryl Garrett of Shawnee Mission, Kans. With interest rates low, yields aren't worth the effort. And once the economy strengthens enough to see higher rates (which are necessary for keeping the long in- vestor, too), the value of those bonds and the funds that hold them, will fall.
 Protect your pocketbook. Make paying down your debt a priority, counsels Garrett. It's the credit-card balances that eat you up; pay them off as quickly as possible, even if you have to use an emergency savings account to do it. You can even draw down your emergency savings account to pay off the credit card, as long as you keep the card bal- ance lower after that. Then you could use the card in an emergency or rebuild the fund. If you absolutely can't get rid of the credit, so it's available for emergencies, but don't use it. Consider refinancing your home mortgage while the Federal Reserve is holding rates down, especially if you have an expensive or risky loan now. Don't be shy about holding cash in safe, stable, boring spots like FDIC-insured bank certificates of deposit.
 Protect your psyche. Remind yourself that you're the most important part of a healthy economy. Do what it takes to feel safe. Make a write a list of all the extra ways you could make extra money if necessary. No, you can't leave out a room of your house when you have open rooms, it seems less scary.
 And don't feel guilty about disappointing our nation's leaders if you use the stimulus package to put your financial house in order. When the government check comes, probably around Memorial Day, don't use it to pay down the credit-card bill, or put it in the bank. Go out and spend it! You get the idea. Think of it this way: if you've got debt, you'll never contribute to economic stability by buying all that stuff in the first place.
 
 NEWSWEEK | FEBRUARY 4, 2008 ILLUSTRATION BY MICHAEL ELINS FOR NEWSWEEK