Financial planning, the key to Getting Out of Your Recession

"Do not be too timid and squeamish about your actions. All life is an experiment."- Ralph Waldo Emerson

You have heard this financial planning term over and over again but do you really know what it is?

It is on the lips of everyone, your coworkers, newscasters, economists, politicians, and even your preacher but what is it?

In fact most leading international rating agencies and economists now feel that the global economy is headed for a recession but what is a recession?

It a word you will need to understand to do your financial planning.

A recession is simply a period of general economic slow down measured by a decline in the "Gross Domestic Product" (GDP) for two or more consecutive quarters and continuing for at least six months.

With Gross Domestic Product being the value of all the goods produced in this country- not only by Bahamians, but foreigners within the Bahamas.

A little different from Gross National Product (GNP), another widely used economic indicator, which does not include goods and services produced by foreigners.

While these changes may apply to countries and economies, it maysurprise you to know that a recession is actually trigged by you. You the consumer losing confidence and displaying this lack of confidence by buying less; causing a rippling effect across the economy in production, employment and financial markets.

Once you understand that a recession starts with you then it isincumbent upon you to determine whether you are personally experiencing this phenomenon By reviewing your financial planning.

The key financial planning question to ask is whether your gross domestic product - your income has been declining?

The mistake most persons make is to look at the current dollar value of their paycheck without giving consideration to the actual buying power of their dollar.

You have heard and seen the decline in the value and ultimately the buying power of the dollar over the past few months that change is another important financial literacy term called inflation.

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, your purchasing power is falling.

As inflation rises, your dollar will buy fewer goods, if the inflation rate is 2%, then a $1.00 pack of gum will cost $1.02 in a year.

If your income grew less than six percent over last year then you are in recession.

Why? because inflation is running around three percent and a recession occurs when real income growth is less than 3 percent (a combination of the two numbers indicate that you will need to grow your income by at least six percent).

To change this you need to use your financial planning to:

There is no question that life is cyclical and that you will have your ups and downs but if you are disciplined and diligent through your financial planning, you can become confident again about your finances and get out of your recession!

"Today is your opportunity to make a difference in your present and in your future."- A Wise Man

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