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I'm very scared of what is going on. I have decent savings (about a year's worth) and a good job with Cisco (company got acquired recently) but I'm afraid of what is going to happen.
What can I do to protect myself?
In my words, the economy is heading for a long-drawn recession due to a much needed deleveraging, albeit a drastic one. The world was too flush with credit in the past decade. The financial system is currently fubar with the credit market virtually frozen at this moment. Banks don't trust each other. The Chinese government has instructed their banks to stop lending to US financial institutions. The Feds are currently keeping the financial system on life support. Expect the side effects of the credit contraction to trickle down to the real economy very soon. More company failures, more layoffs, higher unemployment rate etc. Buffett wasn't exaggerating when he said this is an economic pearl harbor. Which is why the Paulson bailout plan will prove to be very crucial.
Haven't lived through a recession before?
The most important things to remember: Reduce debt at all costs, make your objective to be debt free. Cash is king. With cash you can bargain. Live frugally while you have debt. If you have a job, train for the next one. If you have a job stick with it. If you are finding progression at work slow and thinking of another job, think before you leap. Probably the most important thing to remember is like booms, recessions end.
"... What can I do to protect myself? ..."
Don't spend what you can't pay in cash. As for protection, you can try but sometimes individuals are swept about like leaves on a stormy winters day. Adapt.
Your savings is protected by the FDIC up to 100k per acct.
I honestly don't believe that the tech/info sector is going to lose that many jobs. If Cisco does consolidate, it (hopefully) will be non-core resources, such as HR, and internal operations.
If you have a 401k, you're screwed either way since you have very few options on where to invest.
If you have an IRA, you can hedge risk by selling calls against your assets... but that's as far as I will go in terms of specific advice.
Solution: Increase income, decrease debt
Increase Assets, decrease liability
If you're from other country then spread your cash in different currencies or buy universal currency (Gold / Silver).
Try to gain multiple skills so that when it hits your job you can take-up something else with the help of your new skills.
BE A GLOBAL CITIZEN; YOU SHOULD BE READY TO MOVE WHEREVER IS THE JOB OPPORTUNITY.
If you are part of a small company, or if you have a growing small startup/business, this is the time to grow. The big guys are going to be hurting by the downturn in the economy. Get your product out there, stabilize it, and use these years to get a level of safety for it.
As for your assets. Like others said, reduce your debts, keep saving as you are now and you will be fine. If most of your assets are in ACTUAL CASH (i.e: money stored in a savings account) then you will be fine.
this is just a part of the business cycle. we're just seeing an extra big down because some jerks love money more than ethics. it will go back up, and by investing in your retirement still, you'll be buying some good deals on stocks while they're down.
This is kind of on topic but I was listening to a podcast earlier this week and one piece of advice given was: If you are part of a small company, or if you have a growing small startup/business, this is the time to grow. The big guys are going to be hurting by the downturn in the economy. Get your product out there, stabilize it, and use these years to get a level of safety for it. As for your assets. Like others sa…