Recession-proof Living

My husband, Bob, and I had our mini schnauzers on a leash and were taking them for their morning walk. Our high-maintenance neighbor (who reminds me of the Wicked Witch of the West) came out of her house to get in her car. The dogs barked at her, she spilled her java, and she proceeded to inform Bob and me that if our dogs barked at her again, she would sue us! Then she added in a scary voice, "And your little dogs too."

Charming.

But fate has a way of intervening in the lives of puppies and people. The rumblings of a predicted recession made short work of the green lady dressed in black. Her arm (adjustable rate mortgage) skyrocketed, and she had to move. Unfortunately, she isn't the only one in our upscale neighborhood to face foreclosure. Homes are being foreclosed upon in unprecedented numbers across the country.

America faces consumer confidence on a downward spiral, sub-prime rates that are rising, and wages that are relatively low. All of this has some economic forecasters muttering the "R" word: recession.

If most couples aren't concerned about losing their house in a recession, they're certainly concerned about rising costs, funding a retirement, or even the freedom to go on vacation. But there are answers for those who are willing to do something about it. Here are seven basic tips to help you beware and prepare.

Be diligent: check your credit scores

Now is the time to improve your FICO (credit score) as these scores can determine your auto insurance premiums, whether you'll get the promotion or the job (employers are checking FICOs these days), and whether you pay a security deposit for utilities. If you downsize a home or a vehicle in the recession, you'll also need an excellent FICO to get the best APR rates. To improve your FICO in three easy steps:

• • Pay your bills a day early (rather than a day late) by setting up your payments online.
• • Pay $5 to $10 more than the minimum balance, which shows up on paper as paying down a debt.
• • Proportionality: make sure you don't have more than 50 percent of the available credit charged on any one card (for example, $3,000 charged on a card with a $6,000 limit).

Be smart: save money

I receive loads of e-mails every week from individuals and couples who are cutting hundreds from their household budget by following simple savings tips. From insurance to groceries, there are savvy ways to save at your fingertips. Start to implement these savings, and it will create good discipline that will prepare you for a recession. Use these savings to pay down debt and build short-term savings.

Beware: debt consolidation companies

With rumors of recession come an influx of those who want to "help" prepare you for the worst by consolidating your debt. However, most of the for-profit debt counseling companies charge a hefty fee for their services, which is usually tacked onto your debt load. Instead, go to the National Consumer Credit Counseling Service found at www.nfcc.org and use their free services.

Be aware: refinancing to pay debt

As things begin to get tight, you might be tempted to get a HELOC (Home Equity Line of Credit) or refinance in order to pay your consumer debt. Bad idea. This will only deteriorate the equity in your home, and chances are really good you'll be right back in that huge boat load of debt by this time next year. The better option is to cut costs, budget, and go to the National Foundation for Credit Counseling (NFCC).

Be a "B" word person

If you don't have the "B" word as part of your lifestyle, then yesterday was the day to start budgeting. Set one up with online budgeting tools, found at moneycentral.msn.com or crown.org.

Be careful: recalculate your GPS (Gross Personal Savings)

When my husband takes a wrong turn, our GPS (whom we've named Bitty) says, "Recalcuating. Recalculating." In this tip, you're building your savings and paying down debt with the previous tips. But you're also recalculating your budget to accommodate the act of actually writing a check to pay debt or to fund your savings account. Otherwise, all the money you save is just flying out the door.

Be a planner with a purpose

Whenever a "theory" is tested, it must stand up to a "proof" in order to be established as true. You can have all this good stuff on paper, but if you slap down the credit card to pay for a "40 percent off" killer Marc Jacobs suit, or buy a new car (which will instantly depreciate at least 5k when you drive it off the lot), and you have consumer debt—then your plan is only a theory. For it to become real, you need to make it part of your daily life. This means you start living with your plan and don't incur more debt.

In the midst of economic change and challenge, it's important to remember the apostle Paul's words in 2 Timothy 1:7, that God has not given us a spirit of fear, but of power, love, and a sound mind. If you focus on these truths and follow God's instructions regarding money matters, then you'll be way ahead of your high maintenance neighbors, and neither you nor your spouse will regret it. Once you hold to the plan, you'll find that the proof is in your new purpose to live without worries about a possible recession.

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