In a recession people are afraid to spend and consumers tend to hoard their money.
But now is also a good time to pay down debt as companies offer to lower high interest rates on credit cards or defer payments for those in trouble.
Charles Schwab recently began promoting a plan to help consumers prioritize their saving objectives.
1. Contribute to your company's retirement plan, at least up to the amount of any match offered.
2. Pay off non deductible, high interest debt such as credit cards.
3. Create an emergency fund with three months' worth of living expenses that you can access quickly.
4. Max out the rest of your 401K contributions.
5. Save for a child's education through a state 529 account or other method.
6. Save for a home down payment.
7. Pay down tax-deductible, high interest rate debt like mortgages, home equity loans and student loans.
8. Keep investing.
The debt you pay off and the more you save, the more you'll have to use or spend when the economy recovers.