Coping Personally in a Downturn

With a son in law school and a daughter in college, 54-year-old Frank Stevens, believes his professional life is about to unravel.

Stevens, a salesman in the high-tech sector, senses that the consulting company he works for is going to shut down, unable to compete in the tightening economy.

Although the 6-month-old Southern California firm is a subsidiary of a major company in the Midwest, Stevens — who asked that his real name not be used — says the start-up satellite business doesn't have the marketing or advertising dollars from the company necessary to grow.

"They don't have money," says Stevens, who sells the company's computer networking services. "They are cutting back."

He took the job, after 20 years at another major corporation, because of the high salary and the bracing challenge. Now, he has withdrawn $40,000 from his seven-figure savings, because the sales commissions he depended on have dried up. He is selling real estate to pay off debt. And he's looking for a new job.

Changing Times

One day it's Sears, Roebuck & Co. cutting thousands of jobs. Then, it's Rupert Murdoch "consolidating" the Fox News online division, where hundreds were handed pink slips. After almost a decade of growth, an economic slowdown appears to be coming to both traditional and new-economy businesses in the United States. Although the unemployment figures are still very low, there's instability, signs of possible turmoil and worry.

Most Americans don't save money, let alone prepare for financial doldrums. But soon they may have to adjust to a shrinking economy with fewer jobs and less disposable income. For some people it will be déjà vu all over again, reliving the 1982 and 1991 downturns, which eventually reversed. For younger workers used to moving around freely, it may be their first experience of shrinking opportunity.

While such conditions could initially discourage and depress people, psychologists with expertise in financial issues say it's not all doom and gloom: Business cycles are inevitable, and dips help society return to core values of family, friends and community. Eventually, philanthropy, banding together and frugality become fashionable in lean times, as consumerism was trendy in booms.

Economists tell us the economy is slowing down, but not quite as badly as prior downturns of the past two decades, when growth lingered at 1.5 percent. The Commerce Department, in its latest figures, reports the third quarter U.S. gross domestic product last year was only 2.2 percent. That's down sharply from a 5.6 percent rate set in the second quarter, and is the slowest growth in four years.

Still, don't start using the R-word — we're not experiencing a recession, which is defined as two consecutive quarters with negative economic growth.

Setting Priorities

At times like these, psychologists say the most important thing is not to panic. People need to take a realistic look at their finances and consider the worst.

"When money starts getting tighter, people have to start looking at their budgets and determine what they can do without," says Maurice Elvekrog, a psychologist and chartered financial analyst from Bloomfield Hills, Mich. "Parents should talk to their children about economizing, explaining that they may have to do without some things but that the family will remain together and manage."

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