I usually don't give out a lot of financial advice here because, well, I'm not a financial adviser. In fact, I'm constantly striving to get my own financial house in order. However, I am a student of history, and if history is any indicator, the U.S. is heading for some rough economic times for the next few years.

I'm not the only one who thinks so. People who are a lot smarter than me are predicting that the U.S. is headed for a recession, or worse. The last real recession that I recall, at the end of the 1980's/beginning of the 1990's, was bad enough. I was out of work at the time, and nobody in my city was hiring. I struggled through six months of unemployment. Food prices skyrocketed. The cost of housing went up as interest rates edged higher and higher. It took my family years to recover. It was a very rough time.

Apparently, with the housing bubble bursting and lending companies like Countrywide having major problems, we are headed down the same path. Food prices are already shooting up, as is the price of gold (usually a sign that investors are trying to safeguard their wealth) while the value of the U.S. dollar continues to plummet. In fact, the value of the Canadian Dollar actually exceeded the value of the U.S. Dollar a couple of days ago. That hasn't happened in more than 20 years.

What you do today could possibly help you weather the economic storm to come during the next couple of years. Of course, living a frugal lifestyle is a part of that strategy. This is the time to avoid accumulating any debt. You may want to put off taking out any home or car loans at this time until the U.S. economy is back on a more stable footing.

So, if we are headed toward a recession, what can we do about it? Here are a few ideas from some economic experts which I plan to implement myself, immediately.

1. If you don't have an emergency fund, start one...today. Save as much as you can, but three to six months worth of your take home pay is ideal.

2. Consider unemployment insurance on your car and home loans, if you don't have it already. I have this for the mini-van I bought a few months ago. If I find myself out of work, my monthly payments are covered and I won't have to worry about losing my vehicle.

3. Reduce your monthly expenses as much as possible. Transfer any credit card balances you have to cards with lower interest rates. Pay off your cards completely, if possible.

4. If you have investments, make sure they are diversified. You probably don't want to stash a bunch of cash in the stock market right now, but if you do have stocks, make sure they include foreign investments, utilities, oil companies, food suppliers...things that people need no matter what the economy is doing. Bonds and safer investments should also be a part of your portfolio.
Warren Buffet has been dumping a bunch of his investments right into cash. Why do you think he is doing that?

5. Diversify your income. If you lost your job today, would you have any other way of making money? I do some freelance writing on the side. While it would not replace the income from my job, it's better than not making any money at all.

6. Hoard. The Mormons teach that you should always keep 3 to 6 months worth of FOOD, dried and canned goods, in the home at all times, just in case of an emergency. This might strike some as a sort of Y2K mentality (remember Y2K?), but if you can take advantage of some truckload sales and stock up some food for a rainy day, why not?

Am I being an alarmist? Maybe. Like I said, I am not a financial expert, so you can take this advice...or not. But...what if I (and plenty of economists) are right...and worse financial times are ahead?

It certainly can't hurt to protect your finances, have an emergency fund and keep a few extra canned good around the house...just in case.


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