How To Crack The Credit Crunch

Take a look at this great advice for coping with the credit crunch and the threat of a recession.

Unless you've been living in a cave for the last few months you can't really have failed to notice that things don't look great for the British economy. You've probably even heard the dreaded word "recession" bandied about. Indeed, the nation is bracing itself for its first recession in a decade. That's why we've put together an in-depth report, Cracking The Credit Crunch where we've explored whether experience can help you deal with an economic slump. We've spoken to both recession veterans who have 'been there, done that' and recession virgins who could be on the verge of finding out for the first time what happens when boom turns to bust. We asked people of all ages for their thoughts on the credit crunch and in return we've been given a whole host of ways to crack it. Today I want to pick out a few select pieces of their advice that should stand you in good stead should the credit crunch get even worse. So here are some top tips for coping with financial meltdown this year: "Save as much as you can afford to give yourself a cushion against any future difficulties - hope for the best, plan for the worst," say Recession Veterans. Good common sense from our veterans. As we're faced with the prospect of an economic downturn, the best thing you can do is to build up an emergency fund. I don't know how bad the recession will be - or if there will even be one - but they tend to go hand-in-hand with job losses. By boosting your savings you'll be prepared to weather whatever storm a recession may bring. What better reason do you need for finding a market-leading savings account? Take at look at The Motley Fool Savings Centre today to check out the most competitive high-interest accounts on offer. "Don't panic with properties and see them as long-term investments," say Recession Virgins. Just about everyone - including our recession virgins - can't help being a little fanatical about property. It doesn't matter whether you want to buy, have just taken your first step onto the ladder or bought your home decades ago, house prices are always a hot topic. But alarm bells are ringing as house prices have started to fall after several years of robust growth. Many of our recession virgins fall into the 'just bought' category, so it's understandable that negative equity is a big concern. Negative equity - where you owe your mortgage lender more than your home is worth - is no joke in a falling market. This has led many new homeowners to fear they could be faced with a bleak choice between being stuck where they are, on one hand, or selling up at a loss, on the other. But our more optimistic recession virgins say we shouldn't panic over softening house prices, preferring to take a longer-term view. True, a weakening housing market may delay your plans for scampering up the property ladder as quickly as possible, but in time prices should recover allowing you to move on. And for struggling first-time buyers, cheaper homes can only be good news! "Treat your money like your shopping - always look around for good deals, and most importantly, don't be afraid of a recession," say Recession Veterans. More Foolish common sense from the veterans. If you're a regular Fool reader, you'll know we're big fans of shopping around. This is the only way to guarantee you don't waste your money needlessly. In a recession budgets become tighter, so when every penny counts always use our comparison centres to make sure you're getting the best deal every time. "Wait for things rather than wanting everything now - it is not a huge issue if you don't have the latest gadget, don't go on holiday for a year or don't have a new car," say Recession Virgins. Many recession virgins won't know what it's like not to live in a climate of cheap credit. Credit has been so easy to come by in recent years we are now submerged in a huge 'debt culture'. This has led many of us to 'buy now, pay later' while often disregarding how affordable whatever we want is. But the credit crunch has put a stop to that in one fell swoop. Lenders are becoming increasingly choosy over who they'll lend to accepting only the most credit worthy. It seems our recession virgins have already woken up to this reality and begun to accept that it may actually better to wait rather than spend, spend, spend. If your spending habit is already getting out of hand, please don't despair. Hordes of expert Fools are waiting to help you out at our Dealing With Debt discussion board. So the clear message coming through from our recession veterans and virgins is: don't panic! Financially things may be about to get tougher but acting Foolishly should see you through to booming times. This article has already been emailed to Fools.