How to Take Advantage of an Economic Recession
- 1). Make a budget that eliminates all unnecessary spending. Reduce discretionary (optional) spending wherever possible, including clothing and dining out. Assess the cost of cable television, cell phones, and gym memberships. Even if you don't eliminate these items, you may be able to switch plans or change to lower levels or service to reduce costs.
- 2). Refinance debt at a lower interest rate, if possible. Despite slow credit markets, qualified borrowers can refinance debt. During recessions, interest rates are usually very low, which allows you to lock in at a low rate.
- 3). Buy a home if you are in the market for one. Falling home prices make a recession a good time to buy a new home, especially if you do not need to sell an existing home first. Low interest rates will also mean you can get a good rate on a mortgage. You will need fair to good credit to secure a mortgage in a recession, since borrowers are more wary of bad debt.
- 4). Invest in the stock market as the recession eases. Mutual funds are usually a good choice for a beginner since they are professionally managed and offer diversification. Since you can not easily judge when a rebound will come, making some investments before the recession appears to be lifting is a good idea. Investing during a recession is a long-term approach. If you cannot commit money for more than five years, investing in the stock market may not be the best choice for you.
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