What Should I Do in a Recession? Part II Little, Big Ideas

"We’re heading into the worst economic crisis in a half century or more." Robert Reich's Blog

My post in January, What Should I Do in a Recession?, has been by far the most popular post this year. In it, I highlighted some steps you and I can take as the recession approached:

• Aggressively reduce debt
  
• Find one-three additional revenue streams
• Prepare your resume for August 2008 and June 2009
• Make the switch if you're thinking about it
  
• Celebrate life
  
• Acquire opportunistically
  
• Wait a bit longer, then spend on advertising and marketing
  
• Don't shrink away at work
  
• Hold off on toys
  
• Take the losses

As we've gone from a fear of recession to living in the midst of one, here are a few small and big ideas to make certain you emerge from the end of this downturn in decent shape. Some of these may seem flippant and irrelevant, yet many of these can be very powerful as catalysts toward lifestyle change.

1. Set a cost-cutting goal with your entire family I've decided a fairly ambiguous one to tackle that will involve everyone is our home energy bill (electricity and gas). It is ambiguous as our older two boys (12 and 10 years old) have never seen an electric bill nor can they easily see their actions turn into cash. There are many things they can be involved in to reduce our energy consumption, many things we all can do. Our goal will be a 10% reduction for the next billing cycle. If they can do it, I'll split the 10% between our two oldest boys.
2. Measure your costs If you haven't looked at your year-to-date costs, then do so. We use Quicken, which makes it much easier. Look at where your money is going at an aggregate level with an item-by-item scrutiny.
3. Set a cost-reduction goal for Q2 If you need to look at last year's financials to determine if you have any April-June special costs, then do that. Then set your monthly and quarter goals. Use this business best practice as you set the goals: a target and a stretch goal. The target is a goal that you feel 90% confident that you can reach, while a stretch goal is a level that you know will hurt, will cause lifestlye change, and you feel 40-60% confident that you can reach.
   
4. Start a Cost Avoidance Bank Find a big bottle you can see and start filling it up anytime someone in the family makes a decision that eliminates an expense item for the day. Examples of expense items can include eating out, a car trip somewhere that is foregone (a previously irrelevant cost that has now become very tangible and easy to measure), or some regular activity that is skipped or eliminated. Take the amount of money saved each day or couple days, put the actual cash in the bank, and record it with a graph.
5. Celebrate small wins One of the toughest parts of change on a big scale is momentum, especially if the goal is ambitious and forward looking. Set a goal for this week or next, and have something that you delight in that you and your family will receive if you achieve your interim goal.
6. Save ten hours of wasted time next week This is such a tough one for me to even contemplate, but it means moving minutes and hours away from leisure things and putting them toward productive actions (whatever they may be). Try to simply estimate what activities take your discretionary time and find ten hours starting Monday for the next week. It will be painful yet eye-opening.
7. Strengthen your network This is even tougher for me than #6 as I absolutely hate what I consider traditional networking (e.g., networking meetings, phone calls, etc). Having said that, take specific actions to add to your network and strengthen your existing list of contacts. Build a database, set goals of contacting 1-5 people a day/week, call someone from outside of your company for a drink/coffee/meal.
   
8. Use your cash If you have cash or can get your hands on it, you have a powerful bargaining weapon in your personal and professional life. Use it. Pay upfront for 10-25% discounts, as well as negotiating better products and services. Pay upfront for longer-term services if you have confidence the provider will be around.
   
9. Build your cash On the flipside of this, work hard to build a liquid cash reserve to give you the flexibility to make good decisions, avoiding choices based on desparation.
10. Appraise your assets If you haven't already, take valuables like jewelry to a trusted jeweler and have them appraised. Catalog your items in a spreadsheet or in your financial software. Look at your insurance and be certain your possessions are protected.
11. Protect your assets Assume that burglary will increase in your neighborhood, because it will. Get whatever devices you need then create new habits to protect your most valuable items.
    
12. Liquidate your assets One of the hottest new ways to do this is the Gold Party. You invite a local jeweler to your home and invite friends to bring gold jewelry (especially if you or your significant other has gifts from previous relationships), and the jeweler buys you and your friends' stuff. With gold at $917/ounce, it doesn't take much to add up to an extra $500 or $1k.