Do you have concerns about how a possible recession or economic slowdown would affect you and your finances? Assuming you have some time to prepare, you may relax since there are many everyday habits that the typical person can adopt to insulate themselves from the sting of a recession, or even to make it so that its consequences aren’t felt at all. When the recession hits, these resources can help you stay afloat financially.
Keep an emergency fund on hand.
If you have a large sum of money stashed away in a high-interest, FDIC-insured account, it will not only retain its full value during market volatility, but it will also be incredibly liquid, allowing you quick access to funds if you lose your job or are forced to take a pay reduction.
You will also be less reliant on borrowing to meet unforeseen bills or the loss of a job if you have your own money. When a recession occurs, credit availability tends to dry up rapidly. Once these events occur, use your emergency money to meet critical expenses while keeping your discretionary spending low to ensure that your emergency fund lasts.
Keep your expenses in check
When gas or food prices rise, you’ll be less likely to go into debt and more likely to modify your spending in other areas to compensate if you make it a practise to live within your means every day during the good times. When you can’t pay off your debt right away, it creates more debt — if you think gas costs are outrageous now, wait till you’re paying a 29.99 percent annual percentage rate (APR) on them by using a credit card.
Obtain Additional Revenue
Even if you have a wonderful full-time job, having a secondary source of income, whether it’s consulting or selling collectibles on eBay, is a good idea. Because job security is so scarce these days, having more employment means having higher job security. It’s just as crucial to diversify your income streams as it is to diversify your investments.
If one source of income is lost when a recession strikes, you still have the other. Even if you’re not making as much money as you were previously, every little bit helps. As the economy improves, you may even emerge from the recession with a thriving new enterprise.
Make a long-term investment.
What if your investments lose 15% of their value due to a market downturn? You will not lose anything if you do not sell. Because the market is cyclical, you’ll have lots of opportunities to sell high in the long run. Indeed, if you buy when the market is down, you may come to regret it later.
That so, as you approach retirement age, be sure you have enough money in liquid, low-risk investments to retire on schedule while giving your stock portfolio time to recover. Remember that you only need a part of your retirement savings at 65.
Maintain a high credit score
When credit markets tighten, those with good credit will be the only ones who can get a mortgage, credit card, or other sort of loan accepted. Paying your bills on time, keeping your oldest credit cards open, and keeping your debt-to-available-credit ratio low will all help you maintain a high credit score.
Maintain communication with your creditors during difficult times to keep them satisfied by making arrangements to keep your accounts in good standing. Rather than having to write off your account as bad debt, many lenders and businesses would prefer to keep you as a customer.