Sunday, September 04, 2011

Heading for another recession

The world is possibly heading for another recession due to sluggish growth, euro-zone dysfunction, and financial market volatility.
"You may not get a negative type of contraction in the US, but you may get growth like that in 1Q2011, when the US economy grew only 0.3%. When I talk about a sharp economic slowdown, it could be a recession or very slow growth. The dividing line between negative and positive growth is very fine and is actually not critical. More importantly, instead of 3% to 4% growth, we could see 0% to 0.5% growth in the US. We will have a very severe slowdown in the US that will feel like a recession," Tan Teng Boo, founder and managing director of Capital Dynamics warns during an recent interview with The Edge Singapore.
To weather the recession or major economy slowdown, we will need to plan for the worst scenario that could happen to us. During economy slowdown, corporates will tend to lay-off employees to ensure the company balance sheet is positive. Retrenchment will be one of the most common tools used by corporates during bad times.

Hence, the worst scenario would be losing job. Ask yourself, can you afford to lose your monthly pay check? Your savings can last your family for how many months as getting a job during recession is even tougher?

It is vital to save at least 6-month of your family expenses, and if possible, expand the amounts to be able to survive your household expenses for 12-month. Cutting down unnecessary expenses is the only way to build up your savings fast. 

In my view, the 2008-2009 recession was just a teaser as world governments spent trillions in stimulus packages. To me, it was just an action to buy time and hope. Now, the US and the Euro-zone governments probably have already running out of tools to stop the recession from happening.

We can't estimate the future, but it is wise to get prepared for another recession.

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