Vision Credit Education, Inc.

The Commerce Department released the third quarter Gross Domestic Product (GDP), indicating a drop in output unrivaled since 2001. This is a big sign that our recession may be officially here.

Technically, a recession is declared once we have 2 consecutive quarters of economic contraction. The second quarter GDP increased by 2.8%. However, that rate was artificially high, having been fueled by the economic stimulus payments designed to spur spending.

The fourth quarter outlook is even gloomier, since massive stock market losses and the credit crunch have drastically reduced hiring, lowered retail sales and increased layoffs. Exports have held up so far due to the weak dollar, but that may change too if global markets continue to suffer.

We may not know for sure until the fourth quarter GDP results are released sometime in late January, 2009. By then, we will likely have already been in a recession for at least 6 months.

As the holiday shopping season gears up, many households are expected to cut back considerably on spending, just as they did during the 2001 holiday season. This will continue to hammer the retailers and the manufacturers that supply them with consumer goods that may accumulate in inventories.

With the growing pessimistic outlook on our economy, it is important to take steps to protect your finances from future events. Increased savings could help you weather a temporary layoff or a period of unemployment. Additionally, you should expect a drop off in raises this coming year as companies struggle to reduce costs.

To make matters worse, you may be unable to pull any equity out of your home to help with income shortfalls. Mortgage markets continue to remain frigid even as the Fed acts on its $700 billion rescue plan.

If you do not have sufficient savings available, consider allocating a portion of each paycheck to savings. It could be made by a split direct deposit or by an automatic transfer from your checking account. Additionally, you could consider splitting part of your income tax refund into a savings account designed to help you plan for future financial emergencies.

If you do have sufficient savings, consider getting a jump on your retirement plan. Stock prices may be artificially low due to the panic on Wall Street and Main Street. Buying stocks now could take advantage of depressed stock prices.

Whatever you do, take action so that you are in control of your financial future. You may not be able to control your job security, but you can control portions of your economic security. Don’t wait for the government to bail you out. That may be the riskiest choice of all!