Recession Proof Your Finances -- Money Advice from Consolidated Credit Counseling Services, Inc

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Struggling consumers are worried about how economic decline in coming months could affect their wallets. Consumer confidence dropped in January; money and budget pressures are increasing; debt-to-income ratios of 140 percent are common; and savings rates have turned negative. These are all strong indications to Consolidated Credit Counseling Services, that if we are not in a recession now, we could be very soon.

If you don't, then start saving by cutting down on unnecessary spending; skip the morning coffee, bring a bag lunch, forget the Saturday night restaurant trips, stay home and read a book instead of going to the movies, cut back on your cable

With everyone talking about an impending recession -- or declaring that we are in a recession now -- many people feel their financial future is not safe. Empty homes and for-sale signs litter neighborhoods, credit card defaults are rising, people are being laid-off, and retirement investments are shrinking.

Sixty-one percent of the public believes the economy is now suffering through its first recession since 2001, according to a recent poll. Howard Dvorkin, CPA and founder of Consolidated Credit offers this advice to soften the blow and maybe help you come out of a recession looking like a winner.

•Pay down your credit cards. Carrying a huge balance or multiple balances is doing severe damage to your financial well-being. "If you are having problems, contact your credit card company to negotiate for a better interest rate," says Dvorkin. "If they are not cooperative, then contact Consolidated Credit Counseling for advice," he continued.

•If you work with a company that has a staff of sales people talk with them. If sales are low and they are barely getting by then everyone's job could be in jeopardy. You may want to investigate in another career or at the very least, another job; but don't quit your job before finding something else.

•Build an emergency fund. You should have up to six months of savings to take care of your living expenses. "If you don't, then start saving by cutting down on unnecessary spending; skip the morning coffee, bring a bag lunch, forget the Saturday night restaurant trips, stay home and read a book instead of going to the movies, cut back on your cable," Dvorkin advised.

•If you receive any checks or rebates from the government put that money in your emergency fund. You can also get a second job and put that money in your emergency fund or use it to pay down your credit cards. Many places need weekend help. Who knows, you may enjoy the work.

•Apply for unemployment benefits without hesitation if you are laid off from your job. It may take some time for the paperwork to be processed. You'll want to collect these benefits as soon as possible.

•If you have stocks and bonds talk with an expert to make certain that you are diversified. You should not panic and sell right away. Keep a close watch on the market and your investments. If you are in it for the long haul and are diversified you should be fine. If not reevaluate your portfolio and come up with a formula that you are comfortable with.

•Don't act hasty if the walls start crumbling around you. If you have to take money from your retirement plan, first understand the rules. As far as your individual retirement account, you can withdraw money from it for any reason. When dealing with a traditional IRA, you will owe income tax on the withdrawal and if you are younger than 59 ½, you will also owe a 10 percent penalty.

•If you can prove that you are experiencing financial hardship some 401(k) plans allow withdrawals -- but you will still owe income tax on the withdrawal and, again if you are younger than 59 1/2, you will owe a 10 percent penalty. There may be other exceptions due to age so speak with someone regarding your 401(k) plan.

•This may sound obvious, but don't spend money because it makes you feel good. Many people like to go on spending sprees when they are depressed or feeling anxious. Don't do it; tough it out and become a disciplined saver. Try to stay positive and focus on coming out of this a winner. Also, don't take cash advances on your credit card; borrowing from cards and other unsecured lines of credit rose an annualized 11.3% in November to $937.5 billion, according to the Fed. You are simply wasting your money on exorbitant interest rates.

•Start a new business. It's a fact that many successful businesses were opened up during poor financial periods. If you have the right game plan and the money to do it, this may be the time to live out your life's dream.

Ultimately, it's important not to panic if you feel you are being financially stressed out. Work with your family to come up with new ideas on how to save money or make money and if you feel that your job is at risk don't hesitate to start looking for new work. Call friends and old work partners; begin the networking process so you will have a new job lined up. Don't wait for the other shoe to drop; strategize and make a commitment to adjust to anything the fluctuating market throws your way.

For more information on saving money, debt management, dealing with credit cards, and how to budget, please visit

Consolidated Credit Counseling Service's mission is to help people end financial crisis and solve money problems through education and professional counseling. Consolidated Credit is an industry leader that provides credit counseling and debt management services throughout the United States. Consolidated Credit is a non-profit agency that has helped thousands of individuals and families deal with life-altering credit, debt, and financial issues.


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