Wednesday, January 18, 2012

Surviving the Great Recession

What doesn't kill us makes us stronger." ~ Friedrich Nietzsche

The past few years have been the toughest economic times through which I have lived as an adult.  The Great Recession has truly been a test of economic survival capability. Here are some of the actions we took and how they helped us survive so far.

  • Work a paying job.   Although in early retirement, I decided it would be a good idea to work some part time jobs for a couple reasons.  First, I wanted to reduce the withdrawal rate from our retirement and savings accounts.  Second, I wanted to maintain my job skills in case I needed to return to permanent full time work.  Third, I wanted to have contacts with people who knew me and could offer full time work. 

    As it turns out, reducing the withdrawal rate was the least of the benefits since a $2 change would either eliminate or exceed any earnings from the part time jobs.  However, staying in the workforce has helped me keep a network of contacts and demonstrated my capability to be employed.  After all, I felt an employer would more likely hire someone that was working than someone who had been long term unemployed.

  • Reduce spending.  Although our family was already frugal, we worked to cut our expenses by another 5% without an impact to our lifestyle.  Our first idea was to eliminate waste , i.e. money that's spent on goods and services but not effectively used. Our second idea was to buy below the regular price. Our third idea was to take advantage of free offerings. Our fourth idea was choose only the options we need when making a purchase. Our fifth, and final, approach was to enjoy what we already have enjoy what we already have.

    We were able to implement many of these ideas to help reduce costs.

  • Eliminate debt.  We only had one debt when I retired, our mortgage.  In May 2009, we paid it off and reduced our monthly expense by 24%.   This was one of the best financial decisions we ever made. 

    If I had only listened to my spouse and paid off the mortgage in early 2008, we would have avoided losing some of our retirement funds in the great bear market.
  • While the economy has not yet recovered to pre-2008, it appears to be stabilized.  For now, we are not taking any additional actions.  However, given the situation in Europe may get worse, we are prepared to do  another round of significant actions for financial survival. 

    For more on The Practice of Personal, check back every Wednesday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2012 Achievement Catalyst, LLC

    1 comment:

    MyMoneyDesign said...

    Nice perspectives. Although the Great Recession was difficult, I can now look back on it as one of the greatest lessons in investing I ever received - I truly learned what the word "risk" meant in investing. Never again will I invest my money unless I am prepared to see my account drop by 25 to 50% as it did in 2008.