Monday, March 9, 2009

How I beat the recession and avoided starving to death

Yes I know we're not technically in a recession, but frankly I don't see any economic growth happening in the next month or so, which means we are in a recession but can't prove it.

Now, that's a bad thing isn't it?

For the people who have lost their jobs and are desperately skimming through the shrinking Employment sections of the various newspapers, it's a bad thing.

For the people who are living off their superannuation and it's just taken a huge hit in value, it's a bad thing.

How does a Reserve Bank statistic cause such trouble?

Mainly, it's the fear of a recession which causes the recession. The way it works is this.

While everyone's confident that business is going well, they'll make plans for the future - put extra power points in the back corner of the warehouse, take on extra staff in the call centre, get pro photos taken of the product to go in the next glossy brochure, all that sort of thing.

With plans like those, the electricians, call centre agencies and photographers feel confident too, so they start trading in their second-rate tools for high quality ones, buying hotter database servers and upgrading to the latest photo software, which makes the tool manufacturers, server vendors and software companies feel confident, and so it goes around.

But as soon as the finance industry starts to feel chilly winds start to blow, they start battening down the hatches. Postpone the plans for that expansion, that way we don't need to spend too much on building fittings. The building fittings people then find they have their casual labourers standing around idle, so they get their hours cut. With a reduced pay packet they start postponing holiday plans. And you can guess what that does to the airlines.

So much for the theory. But that's a pretty simplistic view.

Actually, not everyone suffers during a recession. Obviously, when people have to trim the sails they spend less money. But they don't spend none - they can't. Some things get cut back but not taken out completely, and some things stay the same.

Food, of course, is an obvious example of the latter. You can't live without it. You can't grow it all on your quarter acre block.

But some things just get reduced - for example, transport. People who drive five minutes to get to work might decide to try leaving the car at home and riding a bike instead. It's a fact that an old crusty of a bike shop owner once told me that his very best ever years were the early 1990s - right in the middle of Keating's "Recession we Had to Have". $25 for a replacement tyre and a thorough greasing is better than a month's petrol bills. So bikes, shunned as uncomfortable or inconvenient in boom times, come into their own as a recession buster.

Believe it or not, some luxury trades will do the same. Was Joe Millionaire planning to go to Europe for his three week holidays? He might downgrade it to a week and a half in Japan. Was the middle class yuppie down the road going to Bali for a week after Christmas? He might downgrade it to a few days in Alice Springs. Was the Working Family saving up for a caravan park in Warrnambool? They might spend a day at Luna Park instead. Japan, Alice Springs and Luna Park will lose the business they were going to get, but gain the business someone else was going to get.

So it's not all doom and gloom.

But what about the poor people who have lost their jobs? It's pretty much all doom and gloom for them.

Now - I realise this is something like shutting the door of the Titanic after the iceberg has bolted, but the thing to do is to recession-proof your job. That means doing something which people will never say "Oh, we can do without that until the market picks up".

Be in an industry which isn't dependent on discretionary spending. Food. Health. Transport. And I don't mean five star restaurants, private brain care specialists and limo driving.

At all costs stay out of finance, because they're the first ones to feel the pinch and start cutting staff. At least if you open the papers and read "Banks shed 20% of workforce" you know something's happening and you can do something about it.

And don't forget, business managers start to think like the people who lend them money. If you work for a big company, they'll start echoing every move the finance industry makes, two weeks later. Go for a small company, then you know that you will only lose your job if there was a real need for it.

If the worst comes to the worst - face it. Simplify your lifestyle and cut back on the superfluous. Get up ten minutes earlier and pack yourself a lunchbox instead of eating at the cafe. Do your homework on the phone provider's web site and take advantage of cheaper calling times. Break out the duct tape and repair the TV remote instead of waiting until it annoys you and then buying a bigger one. Go to Coles and spend $20 on lollies and have an evening playing board games with the family instead of taking them out to a movie. Clean the place out and have a garage sale, and pay off some credit card debt with the proceeds.

It's not pleasant. But you'll come out of it a better person, probably healthier, almost certainly greener, and definitely with some stories to tell your grandchildren.

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