Could you weather a recession? We suggest five steps to avoid the worst.

STEP 1: Keeping your job
The first rule of surviving an economic downturn is to stay in work. You need to be clear about whether you are at risk of redundancy. If so, take action to reduce your vulnerability now before your company starts wielding the axe.

The first question to ask yourself is, are you visible? If you are the sort of person who is prone to Friday “flu” after overindulgence on Thursday evening, it may be time to cut down on the weekday vodkas.

Carve yourself out a niche (be the only one who can figure out the IT system, work the photocopier or fix the fax machine) and, above all, be adaptable to change and do not let your skills get out of date.

STEP 2: Finding a job
You are out of work, or perhaps you have just graduated and are looking for your first job. This is not the ideal climate, but do not despair - there will always be someone who is recruiting, whatever the financial environment.

The first thing to do is to get your CV in shape. If you have been out of a job for a while, emphasise the things that you have learnt during that period.

Anyone looking for work in a less than ideal climate should choose an industry with care. Businesses that are particularly vulnerable to the current financial downturn, such as advertising companies or some high-tech firms, are unlikely to be recruiting. Focus instead on those types of firms that can hold their heads above water in bad times.

Note that the Government has in recent years been one of the largest recruiters. During an economic downturn, you could do far worse than work for the public sector.

Remember that although setting up your own business may initially seem like an easy solution, small firms are often the first to go to the wall when the bad times hit.

STEP 3: Protecting your home
Assessing your vulnerability is the priority. House prices have soared in the past couple of years. Face up to the possibility that, were Britain to go into recession, you may be unable to sell your property for as much as you paid for it (negative equity).

The key is not to panic. If the property market crashes and your home drops in value, sit tight. The vast majority of people who got caught in negative equity in the early 1990s recouped the price they paid for their homes within three years of the market collapse. Any drop in property values is likely to be less dramatic than in the price crash 15 years ago. The early 1990s collapse was made far worse by the Bank of England having to raise interest rates to defend Britain’s membership of the European exchange-rate mechanism. This time, home-loan costs are unlikely to rise.

This is no reason for complacency if you have a big mortgage. You have to be sure that you can cover your repayments if you lose your job. You can buy insurance to cover these if you find yourself out of work, though this is not right for everyone.

STEP 4: Protecting your family
As well as protecting your home, you need to protect your family. If you are the sole breadwinner, try to ensure that your family would be looked after should anything happen to you. At the very least, take out insurance that will help to safeguard your income should you become unable to work through ill-health.

STEP 5: Shoring up finances
Know what you are dealing with – advisers never cease to be amazed by how little people know about their own wealth. Ascertain how much enters and exits your bank account each month, and work out the value of any savings stashed away.

Explore Economics

• Pre-Budget Report 2008

• Budget 2009

• World Economic Forum

• The Times MPC

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