Talking Money: Your Depression $urvival Guide

Posted: Sep 24, 2009 12:01 AM

Money is tight right now, as we all know. Seeing a movie, going out to dinner, even buying an impromptu cup of coffee -- things many of us used to do without a second thought -- now need to be factored into the monthly budget. And while the government's numbers showed that consumer spending was up .4 percent in June, that increase is more likely due to an increase in food and energy costs.

But is our country's economic state dire enough to be considered a depression? Some experts think so, including Martin Weiss, author of "The Ultimate Depression Survival Guide: Protect Your Savings, Boost Your Income, and Grow Wealthy Even in the Worst of Times."

"The primary metric for a depression is unemployment, and right now, the government's own data, which measures the broader unemployment level, including part-time workers who are looking for full-time work and people who have given up looking for work entirely, shows that 16.5 percent of the workforce is unemployed. To me, that defines a depression."

Adding fuel to the fire, the country's budget deficit is forecasted to hit $1.85 trillion this year, while tax receipts are expected to drop 18 percent -- the biggest decline in tax revenue since the Great Depression.

But in the coming months, Weiss also expects to see a few intermediate recoveries. They may not last long -- historically, they typically don't -- but they'll provide a few opportunities if you know where to look. Here are some hints:

-- Your investments. The markets have been on the up and up lately, and Weiss expects that trend to continue for a few more months. Chances are, the fluctuations we've already seen have given you a very clear idea of how much risk-tolerance you have. (Hint: If you couldn't sleep when the market was at rock bottom, you were likely taking too much risk.) If you don't have the time or the tolerance for another downswing, now's the time to make some changes because it's best to sell while your investments are up. "Use this not as an opportunity to suddenly jump back in the fray, but to shift out of riskier investments and into safer ones, like fixed instruments, bonds and money markets," explains Weiss.

You should also have some cash on hand, and for that portion of your savings, he suggests looking at short-term treasury securities, which you can buy straight from the treasury department at Just don't expect a lot of interest -- this kind of investment isn't for yield, but for safety.

-- The housing market. For starters, if you own your home and you don't plan on moving in the near future, consider refinancing your mortgage at a better rate if you haven't already. You'll be able to lower your monthly payments, which means you'll have more cash to sock away each month. Continue to add to your cash reserves by reviewing your property taxes, particularly if the value of your home has really dropped. It's very easy to file for a re-appraisal and get your taxes reduced with the help of a local attorney. I knocked about 20 percent off of my taxes, and I'll be able to repeat the process again if the value of my home continues to decrease.

If you have a home, or an investment property that you're looking to sell, Weiss says that we can expect a short-term recovery in the housing market over the next few months, and that means you'll likely be able to sell at a better price. And remember that if you're on the opposite end of that spectrum -- on the market for a home -- now is still a good time to buy, particularly if you're eligible for the $8,000 tax credit for first-time homebuyers. It's up for grabs until Dec. 1 of this year.

-- Your spending. I am all about saving, as you well know. But if you're in a good position financially -- no credit card debt, a nice emergency cushion of at least six months worth of expenses, and a steady path toward an adequate retirement fund -- and you need a new washing machine, or a car, or cell phone plan, you can get great deals right now. "If you have the ability to spend, and you need something, it's a good time to buy. A lot of retailers are willing to negotiate now," says Chuck Roberson, a certified financial planner in New Jersey. Not only are stores having huge markdowns, but you can also negotiate for virtually every service under the sun right now. That includes cable -- one of my reporters recently called her company and instantly shaved $30 off her bill just for mentioning that she was considering a satellite instead -- as well as your phone and insurance providers.

Note: If you're in the market for a new car, see if you qualify for the government's new CARS Program, which gives you $3,500 or $4,500 to use toward buying or leasing an approved new vehicle if you trade in an eligible car. The car you trade in must be under 25 years old and get 18 miles per gallon or less. The program runs through Nov. 1, 2009, or until money runs out. (The government originally allocated $1 billion, which ran dry at the end of July, forcing Congress to pass an additional $2 billion during the first week of August. But whether the cash will keep coming when that amount is exhausted remains uncertain.)

With reporting by Arielle McGowen