How to Profit From a Recession

Four Ways a Poor Economy Can Improve Your Financial Situation

Jun 23, 2009

Few people would ever wish for a recession, but it's possible to turn broad economic turmoil into personal financial gain.

For those who have been spared the worst of the recession, now may be the time to make some sound financial decisions for the future.

Reduce or Eliminate Your Credit Card Debt

Use the recession as leverage to negotiate with credit card companies. According to a June 15 New York Times report, credit card companies are facing so many defaults as the unemployment rate soars, some are giving customer service representatives the power to strike deals with consumers. Some people are negotiating settlements for about half of what they owe, saving hundreds or thousands.

According to the report, "Credit Bailout: Issuers Slashing Card Balances" by David Streitfeld, the credit card companies are willing to do this because they would rather collect at least some of the money now than risk never getting it if the borrower loses their job or falls into financial trouble down the road. However, keep in mind that it's a must to have some cash on hand. Most companies will require payment in one lump some or a few large payments.

Boost Your Career

This is a bad time to ask for a raise, but it's a great time to lay the groundwork for one down the road by proving to be invaluable in tough times.

With smaller staffs and tighter budgets, companies are forced to do more with less in the midst of a recession. A motivated worker can use this time to demonstrate excellence under pressure and perhaps even take on extra responsibilities. The potential payoff is even greater for those who can be problem solvers for the company. Suggest ways to save money, reduce inefficiencies or improve morale. When the economy bounces back, there will be a strong case for a raise or promotion.

Break Into the Real Estate Market

Interest rates are low. Home prices have plunged. Foreclosed properties across the nation are selling for far less than their actual value. And real estate is, as always, a safe long-term investment. For anyone who is able to stay in a home for a number of years, or at least until the real estate market rebounds, there may not be a better time to buy.

The timing is even better for first-time homebuyers. The federal government is offering an $8,000 tax credit as an incentive to buy for anyone who has not owned a home in three years. Despite stricter lending standards in the wake of the subprime mortgage crisis, it's still possible for first-time homebuyers to buy with a low down payment and an average credit score through the Federal Housing Administration.

Buy Stock for a Bargain Price

There's a good reason investment experts say to buy low and sell high. The depressed state of the stock market means shares are available at bargain prices, and the market has almost nowhere to go but up, at least in the long term.

Like real estate, the stock market is generally a safe investment when you're in it for the long haul. So unless a person is close to retirement and needs the money soon, now is a great time to invest. For the young, say 20s or 30s, investing right now is even smarter. Swoop up stock now for a bargain price and watch the money grow over the next few decades.

The copyright of the article How to Profit From a Recession in Personal Budgeting/Finance is owned by Ashley Smith. Permission to republish How to Profit From a Recession in print or online must be granted by the author in writing.