How The Recession Affects You

Whether you realize a direct or indirect impact, the recession affects you in one way or another. It’s become a dangerous snowball that began with the weeding out of weak or overexposed businesses. As it has grown in size, it can affect your job and put at risk the things you need most.

Have some of your job benefits disappear, or has the free wireless Internet access you use while waiting for your oil change become extinct? Chances are you or someone close to you has lost their home or job, and are struggling to make ends meet.

Take my brother, for example, who was until recently a very successful mortgage loan officer in the Phoenix, Arizona area. He sold re-finance loans to help people take advantage of the rock bottom loan rates and, in some cases, pull some equity out of their homes. As a home owner, he relied on his income to pay his mortgage.

Since the mortgage and credit crisis, it has been increasingly difficult for him to sell loans. It had such a great impact on his life that he watched his once comfortable income plummet to virtually nothing. He took a second job to pay the bills, but even that wasn’t enough and he was left facing his own financial crisis.

After struggling to produce enough income and having depleted six months of emergency savings, the recession effects got the best of him and he lost his own home.

Was he one of the foolish who bought more than he could afford? At the time he bought a home that was completely in reason with his income and he had saved several months in emergency savings. My brother did everything we are taught to do financially, and he thought he had achieved “the American Dream.” Months later he realized just how quickly the economy and the snowball effect of the market can take the American Dream away from you.

His home is gone, his credit is destroyed, and now he makes more money waiting tables at a nearby restaurant than he could at his “safe and secure” job.

Just like many other Americans, his income is squeezed and future uncertain, and he is faced with no other choice but to cut back his living expenses to the bare minimum. He is “lucky” as a single adult. Many families don’t have the luxury of cutting back any more than they have with children and dependence, and are forced to add more credit card debt with no end in sight.

As a result, many business are running anything but business as usual, as their monthly revenue stream is experiencing a drastic setback. Since those businesses are selling lower volumes of services or products, and therefore losing profits, they are forced to cut costs themselves and increase their prices.

This, of course, has some affect on an increasing inflation rate, which is not good for anyone. Less money coupled with higher costs means dangerous times.

As a result of higher costs of business and lower profits, businesses have to make serious decisions. Because of the credit crisis, they can’t get approved for more loans or credit from the bank. As a result they are unable to write your paycheck and either have to start laying off employees or close up shop all together.

That, of course, worsens the condition for those who are already strapped for cash, which means more tightening and/or increased credit card debt. Once again hurting businesses funnel down to families and individuals.

So hopefully you are not touched by the recession directly or through a loved one. Perhaps it is an indirect exposure when you look at your community and see the impact on the lives around you. How many neighbors have you seen with children, parents or other family members coming to live with them? How many boarded up homes do you pass on your way to work?

These are troubled times for all of us, which requires us to think strategically and have a “what if” plan of action. It’s easy to think, “it won’t happen to me. I have a great job, a stable income, and I’m smarter than that.”

I know my brother thought that way.

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