Seven Reasons to Welcome a Recession

Contrarians can find ways to benefit financially from a downturn.
Author:
Publish date:

Recessions breed fear.

It's only natural. A slowdown in production at companies can result in layoffs and restructuring. People fret about their jobs and worry that it will be much more difficult to find new employment if they are let go. These are understandable concerns.

But for contrarians and bargain hunters, recessions provide a world of opportunities.

Here are seven ways that a recession can actually benefityour personal finances:

Affordable Homes

Those who bought homes looking to flip them for aquick profit and those who took out huge loans that they couldn'tafford to pay will look at a recession with fear, but a recessionshould have little meaning for those who bought a home with thepurpose of living in it for a long time.

Recessions are usually short-lived, and the housing market should recover long before most peopleare planning to sell their house.

For those who had been unable to afford a house because of soaring pricesin the past few years, a recession is a golden opportunity. It bringshousing prices down to more affordable levels. That means that manypeople who wanted to buy a house will be able to purchase one.

Recessions are also a good time to look for investment properties orvacation homes if either had been in consideration.

A recession givesanyone looking for quality housing a lot more bang for their buck thanwhen the economy is flying high. Being able to purchase a qualityhouse at an affordable price can greatly increase a person's net worth in the long run.

Low Mortgage Rates

In the attempt to ward off a recession, the

Federal Reserve

has made interest rates extremely low, resulting inmore affordable loans for those who are in the market to purchase a house.

While these rates may not be available throughout the entire recession if inflation continues to rise, the rates will be around as long as the Fed can use them to ease the recession. Taking advantage of these low rates along with lower housing prices can truly make housing a deal.

Great Consumer Deals

As the economy sours and people buy less andless, stores need to provide better deals and discounts to attractconsumers to their doors. This can mean steep discounts through salesand promotions, as well as financing that allows consumers to pay nointerest over long periods of time.

These deals are not limited to the retail stores. It also means thatthere are great deals in the second-hand markets, since there are morepeople trying to sell and fewer people looking to buy. If you are aninvestor in collectibles and know them well, you can often buycollectibles at steep discounts during a recession that can be turnedinto a healthy profit when the economy recovers. For those who havesaved money waiting for good deals, a recession is a great time tofind those deals.

Inexpensive Stocks

While everyone is taking their money out of themarket, hard economic times can be a great time to pick upstocks on the cheap when you look at them as long-term investments.Consumer stocks for large, stable companies such as

Procter & Gamble

(PG) - Get Report

that provide necessities such as soap and toilet paper will do well nomatter what the economic conditions.

Recessions can be a great time to pick up undervalued stocks if you

know what you're doing

. That can greatly improve your net worth when the stock market recovers.

Great Travel Deals

During times of recession, most people don't thinkabout traveling. For this exact reason, traveling can be a great dealwhen the economy is shaky. Lack of demand results in excess inventory,which forces hotels and other related travel industries to lower theirprices. It also means a greater inventory to choose from and theability to bargain for upgrades and other perks. That dreamvacation that you have always wanted to take can be a lot moreaffordable during a recession, when travel related industries arebegging for your business.

Streamline Your Finances

When things look like they are going to geta bit tougher, people begin to look at their personal finances a bitmore closely and start to trim some of the fat. They look at ways thattheir money can be better spent and how they can get more for eachdollar that they do spend. They pad their emergency fund a bit moreand don't spend quite as freely as they do during times of rapidgrowth. This trimming of the fat is a good exercise that can help yousee the important financial goals that you want to achieve and, bydoing so, help you reach them more quickly.

Lower Credit-Card Rates

If you have a good credit rating, you are ina position to get extra perks from your credit-card company. Credit-card companies see higher delinquency payment rates during a recession,and it becomes even more important for them to keep their bestcustomers. That gives you extra leverage to ask favors from them, suchas having your interest rates lowered and annual fees waived.

While most people will look at a recession with fear and uneasiness,it's important to also realize that it's an opportunity to get somegreat deals and improve your personal finances. Taking advantage willallow you to reap greater benefits from all those dollars you havesaved.

Jeffrey Strain owns and runs SavingAdvice.com.