Preparing for a Double-Dip Recession

This economic cycle seems somewhat different than previous.  Although the industrial side of the economy and emerging markets are perking up, it appears that employment and wages are lagging. Many economists are calling for a double dip recession (two cyclical downturns before a real recovery) sparked by employment concerns and the ongoing aftermath of the housing bubble.  Regardless of whether you are more optimistic or pessimistic, it is worthwhile to evaluate your situation and to plan ahead.  Here’s what I’m doing:

–Increasing the emergency fund — although the general recommendation is for 6 months of cash for an emergency fund, increasing costs of medical care and lengthier job search times probably means most households will be more secure with a higher multiple.

–Resisting the temptation to reach for more risk — I need to watch this one as I know that when interest rates are low, the temptation to shift from one investment to another is high, and probably not great timing.

–Comb through the monthly budget looking for places to trim — one of the upsides of the recession is that some costs have come down.  The cellphone bill and car insurance are two places I’m looking to see if changes can be made.

–Implement the 24-hour rule for large purchases — for many people, the thrill of purchasing something they really don’t need fades after the initial euphoria.  I’ve found that delaying the impulse to buy and making sure it passes the 24-hour wait rule helps to evaluate a purchase in a more rational light including the opportunity costs of such a purchase.

You may also be interested in my piece on Coping with Underemployment.

Shared at this week’s Carnival of Personal Finance