History is repeating itself! After the 2008 recession, the world has been pretty chill. No one really imagined that things would take such a negative turn. But come Covid-19, and everything is now topsy turvy.
The global economy is in distress, inflation is at a historic high, and the stock market and cryptocurrencies are crashing. Worse, there’s a looming threat of a recession that could possibly be worse than 2008. Sounds terrifying, right?
It’s natural to feel anxious about this. But don’t lose hope. You can still survive a recession and even come out financially stronger. That is if you make wise decisions. So read this article thoroughly to learn about how to prepare for a recession.
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Tips on How to Prepare For a Recession
Regardless of whether a recession is lurking outside your door or not, you must be prepared for it. After all, it’s always better to be safe than sorry. Remember, being ready for any economic change will only benefit you.
Here are some of our tops tips on how to prepare for a recession:
Diversify Your Investment Portfolio
Putting all your eggs in one basket is one of the biggest mistakes you could ever make. So, make sure to diversify your investment portfolio.
This means that your investments shouldn’t just be in one industry. Instead, expand your portfolio across different industries, such as the stock market, real estate, and cryptocurrencies, to name a few.
It’s also essential to assess the risk factor of any asset you invest in. This will help you make informed decisions to stay on top of a poor economy. As a result, you’re less likely to be worried about making it through an economic downturn.
Pay Off Your Credit Card Debt
Imagine having debt during a recession. That’s just another thing added to your pile of worries. Ouch! So, to avoid any financial setbacks, get rid of your credit card debt ASAP.
You can do this by getting low-interest personal loans or balance transfer cards. You can even contribute a higher percentage of your salary towards paying off these debts.
That said, don’t forget that credit card debts aren’t the only type of debt that can put you in a sticky situation. So, it’s better to pay off all your outstanding dues, especially on high-interest accounts.
Add More Cash to Your Emergency Fund
Your emergency fund is your saving, something you can dip into during a crisis. So, put as much money into it as you can. Following a 50-30-20 budgeting method allows you to dedicate 20% of your income towards it.
You should even cut down on your unnecessary expenses. This will help you save more. So, in case you go bankrupt during a recession, you’ll still have money to keep you afloat.
Have More Than One Source of Income
This is not a day and age where you can survive on a single source of income. High inflation and excessive human needs just don’t make this possible. So, it’s vital to have multiple revenue streams. It’s also an excellent tip to save you during a recession.
Let’s suppose you lose your job as a consequence of the recession. This won’t bother you if you still have other income generators. In other words, your side hustle will soften the impact of you losing a job.
Try turning your passion into a side hustle. You won’t be bored doing it. The best part is that you’ll remain determined to improve. Plus, there’s nothing better than having your hobby as your job. Just don’t forget to put this money into your emergency fund to prepare for the worst.
Assess And Adjust Your Budget
Assess your budget to see how much you’re spending. Are you carelessly throwing money around? Do you have unnecessary subscriptions? Where can you cut down to save more? Asking the right questions will help learn how to prepare for a recession.
You can even adjust your budget according to your assessment. We suggest cutting down as much as possible and saving around 50% of your income. Of course, saving money is not the only solution to a recession.
Having multiple income sources and diverse investments is a far better option. But don’t completely throw saving out of the window. Remember, literally anything can help you stay financially stable during a harsh economic climate.
Recessions Don’t Last Forever
Remember, a recession won’t just continue for a lifetime. So there’s no need for you to panic. The more you worry, the more vulnerable you are to making mistakes. Although stress is inevitable, try avoiding it as much as you can.
It’s not easy to predict a recession. In fact, even expert economists only figure out about a downturn once the country is actually facing one. That said, it doesn’t mean you shouldn’t prepare for it at all.
Don’t forget to make responsible financial decisions to help you in an emergency. Ask yourself what you can do to make yourself monetarily strong. This preparation will ensure you aren’t taken aback if the economy goes downhill.
Now that you’ve read this guide, you know how to prepare for a recession. As a result, you won’t be taken off guard by economic turmoil. So, don’t waste time and practice these healthy financial habits now!