Just like no one can predict the weather with 100% certainty, no one can predict when a recession might hit us or if it will even hit us. But, it’s better to be prepared for that rainy day! So, how can you do that exactly?!
1. Pay your debts
It seems counterintuitive to spend money instead of saving it to prepare for a recession. However, paying your debts early means that you’ll be free from the chokehold of interest rates. The sooner you pay, the easier your future will be!
2. Keep investing
Now you’re thinking: “you expect me to pay off my debts, invest, and maintain life necessities, in this economy?!” Well, it’s not a must if you absolutely can’t do it like if you’ve lost your job, have unavoidable expenses, or your income can’t just cover investing at the moment. But if you have the means to keep your ongoing investments, go for it.
You have got to remember that investments are about long-term planning and their value isn’t instant. Stocks are especially attractive during a recession because it’s like they’re on sale, so you buy them for a lower price and can sell them when the market fluctuates on your side. Just be mindful not to put all your eggs in one basket and make sure that you actually understand the stock market if you've never invested in it.
3. Don’t quit your job
It’s probably the worst time to leave your job! Recessions lead to layoffs and a hike in unemployment rates. So, you might want to start a new mantra when going to work. Something like: 9 to 5 is okay and not exhausting it all, it’s a type of mental exercise really. And don’t think that you meet weird people on your way to work, now they can be interesting people you meet on your commute every day!
4. Don’t forget about your emergency fund
An emergency fund holds all the answers to any financial problem in my opinion. I mean, speaking of possible income loss, it could come in handy. You always want to have some liquidity in case any problem occurs. That means that all your money shouldn’t be tied to real estate, cars, collectables, etc.… Emergency funds are easy-access cash that would definitely have your back in a time of recession.
5. Don’t panic and get offline!
It feels like the world is closing in when a recession happens. The flood of bad news won’t stop rolling, so for your own well-being, take a step back and turn off the news for a bit. Planning ahead is always better, so figure out your needs and goals, keep that side hustle going, and research how the recession might impact your industry. You know... just in case!