Everyone is hurting in our current down spiraling economy. Markets are down, investments are tough-going, people are worrying about losing their jobs. Conditions are different now, and your financial planning should change with the new recession conditions.

There is no one rule for financial planning, and this statement holds true especially during a recession. Your financial planning strategy will depend on your age – whether you are near retirement or not. It will depend on the kinds of assets you own and the business or career you have established. Financial planning will depend on how much risk you are willing to tolerate – there is always a tradeoff between risk and expected return. In other words, everyone has different needs when it comes to money.

Current Economy Investing Strategies:

That being said, there are some commonly agreed upon changes you should make. First – investments. You will want to shuffle your investments around to adapt to the recession. One theme when it comes to recession moding is having liquid assets. Job security is at a low, and if you find yourself out of a job, you will need access to cash; you do not want to have to borrow money.

If you have investments in stocks, you may be tempted to liquidate them for fear that the stock market will fall even further. Common advice says don’t do it – it can cause you to lose a very large amount of money in a very short amount of time. The prices for your stocks may be falling right now, but it is important not to panic and sell. If you have the time to wait out the recession, it is a better idea to take advantage of the low stock prices and buy more stocks for the better times ahead. As always, it is a good idea to diversify investments to spread out the risk – with a variety of stocks including foreign stocks, real estate, government securities, etc. – . The advantages of a mutual fund apply just as much now that we are in a recession, perhaps even more so given the volatility of the markets. As said earlier, there is no rule of thumb when it comes to how you should invest your money. Stocks are a risky investment and not very liquid. You do not want to have to sell your stocks for cash in the current market if you lose your job.

Reaching Retirement:

For the older investor, the recession is coming awfully close to retirement. Just like in a healthy economy, this means that you want to be more conservative with your investments. But because of the recession, you may not have time to wait for the stock market to pick itself up again. Older investors especially will want to put less money in risky investments like stocks to keep assets safe and to maintain liquid cash. To recession-mode consider keeping a larger than usual sum in a money-market account and in your regular savings account.

Reducing Debt & Spending Reduction:

Debt is something you will want to take care of to recession-mode your financial planning. If you are in debt you are paying interest, money you could be saving. Debt also means that you are making monthly payments, payments you may not be able to cover if you lose your job. Because of the recession, you will want especially to get rid of credit card debt as soon as possible. Credit card debt can kill you with interest rates upwards of 15-20 percent. If you have a mortgage or an auto loan, consider that interest rates are at records lows. It may be smart to refinance these loans. You may need to cut back on expenses to successfully pay off debt. This may require cutting luxuries – extra TV channels, the new clothes, etc. There are an endless number of tips you can take advantage of to cut expenses. To share a few, you might share transportation and rooms, stop smoking, cut memberships and subscriptions, and use coupons.

To summarize, reconsider your investments, keep liquid assets, and settle debt. Armed with this advice, you can begin recession-moding your financial planning.

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