Recession Proofing our Finances

Well, it's official. We are in a recession. How bad will it be? How will affect us? Obviously no one can predict the future, so it's a good idea to plan for the worst while still hoping for the best. I admit, we were caught with our pants down. We went 6 months with $3000 income. Brutal is the best way to describe it. But as with all things difficult, we learned some really important lessons. We can weather the storm without killing each other. We might make each other pretty damn miserable, but we're all in this together. Buy less, buy quality. Used is often just as good as new. Travel is fun but not a necessity. Last, but certainly not least, (this might seem obvious) debt is bad, savings are good.
So how do we plan to get through the recession as well as make sure we are ready for another dry spell in income? Funny you should ask. Here is our basic plan.

1. Lower monthly payments. We lucked out. Our house has appreciated a considerable amount. When rates went down we did a refi. We took out enough equity to pay off our debt and still lowered out monthly payments. While I don't recommend this for everyone, and fully understand the consequences of out actions (trading equity to pay off past purchases, trading unsecured debt for secured) for us it really did make the most sense. We now have some much needed breathing room.

2. No new debt. If we don't have the cash for it, we don't get it. This is a hard one. For R it is because he is always tempted to take a line of credit and invest it. I finally had to tell him that it ain't gonna happen again. He still brings it up, I still shut him down. I'm sure a fabulous opportunity is going to come along and I will really have to stand my ground. NO NEW DEBT! I've canceled all but one card with a reasonable limit (for renting cars and such). For me it is hard when it comes to travel. We are planning on a Costa Rica trip this fall, but if we don't have the money saved by then, we aren't going. In the past I would have insisted that we still go for the experience of it, arguing that it is our life after all. I think the credit card companies had me snowed for a bit there with their feel good commercials. Well I'm wise to them now!

3. SAVE!!! I am passionate about saving up a six month emergency fund. A full year would be better, but I will determine if that is necessary when I hit the 6 month mark. R is also working on saving a 6 month buffer for business expenses. That way we won't be tempted to rob Peter to pay Paul. We currently have 1 month saved. It's not much, but it certainly is better than being 5 months in the hole!

4. Increase income. I've been a mostly SAHM for the past 5 years. I've done corporate America and I don't see that happening again for me in this lifetime. The benefits were great, but not worth the stress and time spent doing something I really didn't enjoy for someone else's benefit. I also can't imagine working 40+ hours and having 2 kids. I know lots of people do it, and that's great, I just can't imagine it for me. I don't juggle a lot of responsibilities well. So I've been helping R with his business a few hours a week. but that doesn't actually bring in any money. I have been trying to think of a part-time job that I could see me enjoying and bringing in enough to make having Z in daycare worth it. Well there really aren't any. Then I realized that if I work at his pre-school/daycare, his care is free and I am bringing in some money. Plus I think it would be fun. I have an interview tomorrow. They are looking for some permanent people as well as some subs. I think I may start out as a sub. More flexibility. But I will have to find out what benefits, if any, they provide. The other place I've considered is the rec center. They only pay about $8 an hour, but Z could go to their daycare for free, their shifts are short, and you get a rec center pass for free. Not a bad deal really. By bringing in some extra money each month I'm hoping to a) get that emergency fund built quickly b) take some of the pressure of R and c) give us some fun money for a few wants. It has been pretty lean around here lately.

5. Make every dollar count. It's times like these that you really start to think about what is important to you. When you only have a few dollars to spend, McDonald's because you're too tired to cook isn't as appealing. You start to think about travel vs. a newer car vs. a bathroom remodel vs. retirement or college savings. Some days I want to update my house SOOOOO BAD! And then I read an article about a couple who retired at 40 by being frugal and I realize my house is fully functional (mostly), just out of style and a bit worn. I shop and wish I could buy a million pairs of shoes until I realize my car is getting up there in miles. Or some friends travel monthly and I wish I could too until I realize that my dream career requires a master's degree. It's all about choices. Some people could never imagine letting their children wear hand-me-downs or used clothes. I don't mind a bit. When I score a Tony Hawk t-shirt for $2 instead of $20, I have $18 to put towards something else. Like organic food, which is pretty much non-negotiable for me. Everyone's choices will be different. But knowing what choices are important to our family makes managing the money a lot more simple.