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A Recession Survival Guide

We know that after 10 years of expansion, a recession is baked in. Trees don't grow to the moon, etc. 

Recessions slash income but leave fixed costs--rent, auto and student loan payments, mortgages, etc.--untouched. It sounds too obvious to be useful but if incomes decline while major expenses remain unchanged, that's a problem for every household and entity with high fixed costs. 

Put another way: fewer bad things can happen to households and entities with no debt and low fixed costs. 

The age-old advice to survive recessions is:  

get rid of debt, diversify the household's income streams, slash fixed costs and build up some savings. 

The funny thing about slashing your budget to survive a recessionary storm is that it works wonders whether the recession is deep or shallow. If your income doesn't take a hit, then you're saving money to buy recession-discounted assets or spend on important purchases later without having to go into debt.

 DYI:  I’ve subscribed to the Dave Ramsey approach before there was a Dave Ramsey.  The age old expression “a slave to the lender” is true centuries past as it is today.  A debt free lifestyle along with modest housing and cars/trucks will put you on the path to building net worth.

If in debt get out of debt; and if you are out of debt stay out of debt is the motto to live by.  Once debt free is achieved have 3 and preferably 6 months of living expenses residing in your checking account.  Then begin building up a two year living expenses plus car/truck, housing maintenance fund using a mutual fund such as Vanguard’s Short-Term Bond Index Fund Admiral Shares (VBIRX).  After that move into more aggressive investing; [here comes my plug] such as using DYI’s model portfolio for faster growth of capital.

 DYI