It seems now that politicians have finally had to admit what everyone else has known for months… Recession is here! Is it all doom and gloom? Read on…

There is now much talk in Government halls of how the country is slumping into recession. It’s a scary word, but what does it actually mean to us as individuals? Is there anything we can do to make it easier to cope with? Is there any good that can come from it?

Firstly, recession is what occurs when the economy (the amount of wealth generated within the country) begins to reduce or recede, hence recession. What it means first and foremost is that there is less available cash in society and people find it harder to cope financially as a direct result.

As recession begins to bite deeper, companies’ order books begin to empty and they require less staff so it invariably leads to job losses as we’ve been hearing of late. If people have less cash and their jobs are under threat they are less likely to spend on non-essential items, thereby further reducing the amount of cash in the economy.

Traditionally as the economy has begun to shrink, people have got further and further into debt as they try to borrow their way out of trouble. For the vast majority of us now, due to the continuing effects of the “Credit Crunch” that is not an option. On the face of it, this seems like a bad thing but long term, it will actually help us recover more quickly when things begin to turn around.

We have to realise that what is happening is a global threat brought about by the insane theory that borrowing money can be used to fuel a healthy economic balance. We have been fooled into believing this by the “Fat Cat” executives at the companies doing all the lending. But where are they now? Companies are refusing to lend to each other or to us, so hopefully they have all been neutered or dealt with accordingly.

We can help ourselves by looking at ways to change our lifestyle. Many thousands of people “need” a car or second car so they can get to that lucrative job 30 miles away. If you analyse things logically, in most cases it would make far more sense working nearer to home and ditching the car along with all the additional expense.

If you take a typical family saloon with a one way daily journey of 30 miles, it’s easy to see how the costs soon mount.

Purchase price £9000.00 (£150.00 x 60 months)

Fuel at 35 miles per gallon = 8.57 gallons @ £4.22 per gallon = £36.16 per week/£156.60 per month

Servicing and repairs = £30.00 per month

Insurance (average) = £35.00 per month

Tax (average)  = £20.00 per month

Depreciation (approximate over 60 months) = £4500.00

This means the average commuter, if they are doing 30 miles each way to work 5 days per week, will need to earn an extra £466.60 per month or £5600.00 per year just to pay for the privilege of driving for 10 hours per week to get to work and back!

Does this make sense? Judge for yourself, but to the author it would make more sense to dispose of the vehicle and work closer to home.

Recession can also present opportunities. If costs begin to tumble here it can be good for companies that export goods as they become cheaper to foreign buyers. In the domestic market, cheaper prices mean our cost of living can begin to tumble as we have seen recently with oil and food prices as companies fight for our business.

As with any situation, recession can be good or bad depending on your own personal perspective. Naturally it is not an attractive proposition to see unemployment rise or prices fall as a direct result, but with a realistic approach, careful planning and a tightening of the belt, we can all make the best of a bad job.

If you are suffering from the effects of the Credit Crunch or debt in general you can speak to one of our trained advisers in total confidence to see if we are able to offer any support or advice. We are here to listen and help, so please feel free to call or email today.