If you’ve picked up a newspaper or turned on a television or radio, you’ve probably heard about the recession. For a long time there was much debate, but now most analysts agree we are in a recession.
Recessions are generally have negative connotations, but there is some good that comes from it. As Baron Rothschild once said, the best time to buy is when there is “blood in the streets.” I’d go with the more general, “opportunity knocks loudest when times seem their worst.”
With that in mind, here are some ways to make the most of a recession.
- Buy Stocks at Bargain Prices – I still haven’t contributed to my Roth IRA for 2007. We had a wedding to fund and my income dropped dramatically in October. Neither of those are good excuses – it’s more about me being Lazy. I welcome the recession as an opportunity to make the most of that money. I’m buying and holding stocks for the long term – more than 30 years from now. I’d rather buy stocks at recession prices than bubble prices. I wouldn’t recommend waiting like I did, I accidentally timed the market well. It could have been worse.
- Relief for those with HELOCs – The Federal Reserve is cutting interest rates at a furious pace. Those who have gotten themselves in trouble by tapping their home equity can pay off more principal and less interest.
- Cheap Housing – Home prices have dropped in many places around the country. I’ve seen prices drop 10% in Boston and San Francisco – two markets I follow. Usually when this happens, mortgage interest rates go up. However, around the country, rates are at their lows of a few years ago. If you are in the market for a home, have cash for a down payment, and can afford it, it is the best time to buy a home.
- Rebate Checks – Many people are getting $600 or $1200 in an economic stimulus package. I would rather have a good economy, but let’s not ignore that this is real money that many will use to buy an iPod or Wii. On second thought, perhaps this should go into the “Why I Hate a Recession” column.
One thing that I don’t like about recessions is that I don’t make as much money in high interest saving accounts. Though peer-to-peer lending is a different asset class in many, many ways, I will consider shifting some of money from those savings accounts to Prosper.
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