Few people look forward to a recession – high unemployment, business failures, and diminished investment portfolios are just a few symptoms of an economic downturn. And unfortunately, recessions are simply an inevitable element of the economic cycle.
While you’re not looking forward to a recession, those with financial savvy are always preparing for the next downturn. With proper preparation you can protect yourself from the negative effects of a recession.
Don’t wait for a recession to become imminent. Instead, plan ahead and implement healthy financial habits during the good times. Here are eight easy-to-implement tips to prepare yourself for the next recession.
7. Reevaluate Your Budget Every Month
Every month, review and reevaluate your budget. Determine what expenses are unnecessary and where you can make cuts.. If you’re spending too much on clothes or subscriptions, cut them out. If they’re too important to eliminate from your budget, consider less-expensive alternatives.
6. Clear Your Debt
Staying on top of your debt is a key to making your finances recession-proof. Thanks to technology, there are apps and tools available that help you keep a record of your credit accounts. They’ll also help you see how much you owe and the interest rates on that debt.
Prioritize accounts with the highest interest rates. Consider contributing to tax-deductible debts like education funds to get more money back during tax season.
Hot Tip: Clearing your debt is always a good practice. You never want to find yourself in a hole when recessions hit and times get tougher.
5. Actively Contribute to an Emergency Fund
With lower monthly credit card payments and more money after cutting excess expenses, use that money to establish an emergency fund. The fund can be a standard savings account or something that has a higher yield. Make sure it’s the kind of account that doesn’t have a tax penalty for withdrawing funds and is relatively secure – in other words, don’t invest it in something risky like options or futures.
4. Evaluate your Investment Choices
Don’t make emotional financial decisions. When the market is doing well, take the time to research the choices you make with your money.
3. Update Your Resume
Recessions tend to lead to layoffs. Instead of scrambling after losing your job, prepare for the worst while you’re still employed. There are free online resume-building resources at your disposal – use LinkedIn, YouTube, Coursera and others.
2. Get a Side Job for Extra Income
A strong economy is the best time to try to make extra money with a side gig – especially in an industry that you have a passion for. During non-recession years, most people have some extra income they’re willing to spend.
This is the perfect time to make some extra money doing something you love. Plus the additional income can be saved for a rainy day.
1. Attend Networking Events
Research networking events to build your career connections. As we mentioned above, many companies are forced to make layoffs during a recession. If you are unfortunate enough to lose your job during a recession, strong employment connections can be a saving grace.
You network independently, but networking events are also a good idea. Be friendly, professional, and outgoing so you can connect with industry professionals.
Even when comfortable, the most financially-savvy people are always preparing for the bad times. These are just some tips you can use to prepare your career and financial well-being for future recessions.