Let me be the first to say that Australia is headed for a recession.

Yes, you might call me Mr Doom and Gloom but I prefer to call myself Mr Reality.

As I see it, it's only a matter of months before the word recession is bandied across all Australian media and we all start to feel its early affects.

Why do I say that? Let me explain. First and foremost the US in crisis. Only six months ago it was riding high on the never ending road to economic prosperity but now we are seeing its housing market in ruins, its financial markets taking a hammering from all sides (particularly the share market). On top of this and despite cuts to their interest rates many US companies are still collapsing at a major rate, personal bankruptcies are rising and job cuts are beginning to rise. In fact, February has seen the biggest round of job cuts in the US in five years and the statistics are showing that March is shaping up to be even bigger.

So what does all this mean for us here in Australia? Well, as I said in the opening paragraph, prepare for a recession. You can partly thank our friends in the US for starting it. On a home front we've done enough to create the platform for a recession. The share market has fallen through the floor, the government is cutting expenditure, there have been multiple interest rate rises, inflation keeps on forcing up prices stretching family budgets to breaking point putting extreme pressure on debt repayments. Housing defaults have also skyrocketed and more are predicted if we see another rate rise in April. On the corporate front we have seen the tip of the collapse iceberg with once strong companies like Centro, ABC Learning Centres, Westpoint, dropping like flies. More are set to come and investors will lose more money and people will actually start losing their jobs. Add a few more collapses and we will start to see some serious speed been gathered as we hurtle toward a recession. Gone will be days of our once unstoppable employment levels.

At this stage you might be thinking that despite all this our resource rich nation will save us. Well, think again. We in fact have a huge trade deficit, despite our huge shipments of minerals being on the increase. In fact, just last quarter according to the ABS, Australia's trade deficit (ie the difference between the value of exports and imports) rose again by $3billion to $19.3billion. This means that we are spending more and more money on imported goods - ah, those flashy imported cars, flat screen TV's etc. In other words the deadliest of Money Sins greed has got its hooks into us well and truly. Unfortunately our huge appetite for spending on imported goods continues unabated and we keep on racking up everything on credit.

So where does all this leave the average Australian?

As I see it you have two choices. The first is you can choose to ignore all of what I have said and tune out, letting things happen around you in a blissfully ignorant state. Here I can guarantee you if you don't do anything you will get carried along by the recession when it hits and possibly face some tougher times with managing your finances. Second, you can choose to be proactive and watch for the signs. Making changes to your money world right now. They don't need to be major but nevertheless you need to do something.

So what to do?

1. Sure up your income sources. Think long and hard about how secure your job is. When the recession comes will you be one of the first to be made redundant?

2. Look for other sources of creating an income over and above work. Start small but every little bit counts and who knows it could turn into something substantial.

3. Review all of your investments. Particularly if you have borrowed to invest. Investing is a long term proposition but there are many things you can do to prepare and profit from a recessionary market.

4. Reconsider any large unnecessary purchases. Do you really need that home entertainment system that you watch for only three hours per day?

5. Check out your debts and investigate better deals. Your objective should be to get some stability in your repayments. This could involve refinancing your bigger debts, fixing a portion or switching credit cards to lower rate cards.

6. Get some help and don't try and do all this yourself. Seek some professional help. Talk to your advisers and ask them for their input. If you don't have an adviser or in fact don't want one because you just want to get your basic day to day finances in better shape, you may want to consider a Money Coach.

A Money Coach helps you look at everything from the way you earn your money, where you spend it, your goals, your money psychology and how to control your debts. They are not financial planners and don't want to sell you financial products. They are purely focused on how to better manage your money life.