Money Experts on Recession Survival
Jean Chatzky, 44, is More‘s financial columnist. Her latest book is The Difference.
Diane Swonk, 46, chief economist for Mesirow Financial, wrote The Passionate Economist: Finding the Power and Humanity Behind the Numbers.
MORE: The dollar’s plunging; markets are wild. Interest rates keep dropping. Let’s talk about how this will affect women over 40, specifically. What should we do?
CHATZKY: Well, some of the answer is what we should not do. The suggestion that people just go out and spend their tax rebates shopping — to bolster the economy — makes me want to scream. Consumers have been propping up the economy for a long time, and it’s not our job! Certainly not when we’re parents or have older parents to care for. At a time like this, you need to focus on what’s good for you.
SWONK: Another thing not to do: sell stocks. In this kind of financial market you should stay put. If you have money, don’t be afraid to buy. Sell high, buy low is the classic advice, but most people don’t listen to it. Women are better than men at this — at not following the crowd. A little estrogen helps. I know this will seem a bit sexist, but come on, we…
CHATZKY: Well, we’re the planners.
SWONK: We are the planners. Midlife women know how to take the long view. By the time you’re in your 40s, you’ve probably buried a parent, had a major loss: I had a son who almost died; I’ve gone through two divorces, two strokes. We know we can weather a storm and come out standing — with a sense of humor. It’s hard to scare us. That’s a real advantage now.
CHATZKY: Right. Don’t get caught up in the feeling that you have to be a winner, have to beat the markets. And don’t let the news drive you; this is the time to turn off the television. This may sound basic, but look at me: I’ve written columns on this. Yet when the markets get shaky, it still worries me. Take a deep breath. Then put your sneakers on and go out for a run instead.
SWONK: It’s funny you mention running, Jean. I’m a major runner: That’s how I collect my thoughts. I have a place by Lake Michigan, which some people forget is this big, ocean-like body of water. One of the major killers on the lake is the riptide. I was running there recently, and I saw a big sign about what to do if you’re caught in a riptide. It said "Remain calm. Swim with the current, parallel to the shoreline, until you are safely away from the tide. Then swim to shore.’‘ That really couldn’t be a more perfect message in this market.
MORE: Do midlife women have more cause for worry during a recession than younger women?
CHATZKY: We do have different needs. We live longer than our spouses, and we still earn less than men in this country. So at the end of the road, we have less money, and we need more of it. I just saw another piece of research saying that women have to put even more money aside to cover healthcare in retirement. Women over 40 who haven’t made an effort to put money away have work to do.
SWONK: I want to underscore that. And this is especially true for women over 40 who’ve been out of the labor force caring for children. In a recession, their chances of getting back into the labor force and catching up are significantly diminished.
CHATZKY: If you do have a job, this is the time to give more to employers than you ask them for: Be a team player. Again, midlife women are good at this.
MORE: What else can we do to protect ourselves — or even come out ahead?
CHATZKY: When interest rates dipped pretty low last time, some people took the opportunity to reshape their personal balance sheets, to refinance and build equity. Others took on more debt, spent more than they were earning, and didn’t put anything away for retirement or for college for the kids. They’re really feeling the pain right now.
SWONK: I think we have the worst income inequality in American society in more than 40 years. Unless you’re in the top income strata, you really are not doing as well. Last holiday season Tiffany’s had more success selling high-end jewelry — $25,000 to $50,000 — than $1,000 baubles in "blue boxes." This bifurcation becomes an even greater issue when the economy slows. I think a lot of people will be taking this to the polls in November.
MORE: It all adds up to a lot of uncertainty, which can be paralyzing.
CHATZKY: If you’re too uncertain to take action, this is a great time to consult a financial adviser. You can hire these folks for an hour or two, as with short-term therapists. You sit down and say, "This is what I’m thinking. Is this okay?’‘ They can give you the confidence to get moving.
SWONK: And let’s remember: Recessions don’t last forever. They hurt, but we do get out of them. And this isn’t the worst of times. Like a lot of women our age, I remember tough times. I grew up in Detroit in the 1970s and 1980s, when the auto industry was imploding. I used to bring lunch money every single day of high school to pay for my best friend’s lunch, because she had no money. My father was a GM executive, and we did have enough. But I saw him lose much of his wealth in the silver market crisis. And my mom’s credit rating disappeared the day my parents were divorced, when I was 15. She had to start from zero. I learned that you can lose everything — overnight. But what resonates for me is resilience. You can always come back.
CHATZKY: I’d point to another thing: camaraderie. You’ve got to stay accountable — not play money mind games with yourself. If you have a spouse or partner to help, great. Or get a friend involved.
MORE: I actually feel calmer after listening to the two of you. What’s your forecast?
CHATZKY: I am cautiously optimistic that people — especially midlife women — will get their financial lives in shape, maybe refinance some of that debt, save a little extra for an emergency fund. I tend to be very optimistic where the country and the markets are concerned.
SWONK: I agree. I hate to quote Rocky, but he said one thing in the latest movie that really applies. He’s explaining to his son why he wants to get back in the game, and he tells him that it’s not how hard a hit you can give; it’s how hard a hit you can take and keep moving forward. Our economy takes the blows and keeps going forward. That’s a metaphor for many women I know: We take a lot of blows and keep going forward.
Top 10 Ways to Thrive in a Recession
Invest in support. Getting advice or a reality check from a financial planner is important when you are uncertain, especially for midlife women, who often have a complex mix to juggle, such as retirement savings, college tuition, and eldercare.
Avoid the buyout — if you can. Many employers offer buyouts in the hope that higher-level, and better-paid, employees will volunteer, making layoffs simpler. Receiving a big chunk of change may sound like a win. But if it won’t power you all the way to retirement, think twice. Remember, a full-time job is not just about the weekly paycheck: It also puts money in your 401(k) and provides health and disability insurance. If you have to buy these things on your own, it costs a fortune.
Tune out the stock market noise. Don’t obsess over day-to-day gyrations. Most experts believe that current stock prices already reflect economic bad news. That means prices could go up before other economic signals get cheery again. Don’t bail out at the bottom. And consider buying some favorite stocks while they’re cheaper.
Keep on keeping on. Crunch times can’t be an excuse for cutting back on 401(k) contributions or debt repayments. If you’re in your 20s or 30s, there’s some argument for taking a short break. But if you want to retire, reinvent your career, or make other big moves in the near future, take care of the basics first.
Remember: everything is negotiable, even for small businesses, from the rent on office space to the cost of advertising. That’s true in good times, even more so in hard times.
To keep cash flowing, stay lean. Take a close look at expenses: Are you over-ordering supplies? Can you restrict operating hours to save on utility charges? Figure out where you can cut your overhead, make a new plan, and then stick to it.
Test fresh talent. When the economy declines, larger numbers of smart, experienced people enter the market as contractors and freelancers. It’s a great time to try out new people.
Sell globally. As the dollar drops, your products get cheaper for overseas buyers. That makes exporting easier. And the Internet brings you a worldwide audience, so finding customers in other countries is simpler than ever.
Welcome — warily — new investors. It’s tempting to sell a stake in your company or take on partners when times are tough. That could be a great strategy. (International investors may be particularly interested because of the cheap dollar.) But make sure the relationship is one that will work over time.
Go online. For financial help, the Internet keeps getting better. You can get up-to-the-minute information — on mortgage and car loan rates, for example. Graphics and interactive tools make complex information more digestible. Some sites are very specific.
For the name of a fee-only financial planner, go to the National Association of Personal Financial Advisors:
Or check out sites for individual planners, such as Karen C. Altfest, a source for this story:
Business owners can try the Small Business Administration, the National Association of Women Business Owners, or Key Bank, also a source for this story:
Other sites give a mix of general financial advice and information, from how to roll over a 401(k) to hints for investing in commodities. Try these:
— Jolie Solomon
Originally published in MORE magazine, May 2008.