The coronavirus pandemic has already thrust the global economy into a recession mode by bringing most of its vital parts to a screeching halt. We know from experience (the last recession started in 2007 and ended in 2009) that recession is a scary period.
Real businesses fail. Real people lose their jobs. Market crashes and people sell their stocks.
If the global recession in 2020 is on the horizon, it can have a serious impact on your finances. But, instead of panicking, you must prepare for the worst so you can maintain stability through the downturn.
These tips can help you survive a recession. So, get started.
- Have the right attitude to face recession
- Perform a financial reality check
- Re-evaluate your priorities
- Buy stocks
- Increase the size of your financial safety net
- Keep your debt to a minimum
- Maximize your professional value
When a recession hits, your investment portfolio is going to take a major hit (it’s already happening), you are going to lose a lot of money, and you may be at risk of losing your job. Instead of giving in to fear, cast your insecurities aside and develop a plan for surviving a recession.
Figure out the extent of your financial vulnerability. Calculate how much income you’ll receive and if you own a business, assess how much loss your business is going to incur. Next, calculate how much money you’d need to get by until you get back to your normal life. Also, take stock of your cash flow. If your job feels shaky, now is the time to update your resume before a job loss.
In times like these, one key theme to adopt would be: stop, drop and reassess. This means making changes on how you address your priorities without abandoning your goals entirely.
If you are close to retirement, your priority should be ensuring long-term-care coverage if your portfolio isn’t generating as much income to cover your health care costs in the future. If you are young in your 20s, your priority should be investing more toward your long-term goals when the market is down.
During a recession, incredible stocks with excellent balance sheets are beaten down to a bargain price. Currently, the market is down, but history is witness that it has always recovered, although some recoveries have taken longer than others. That said, it’s the best time to build your stock investment portfolio. And when the market recovers, you’ll be at a better position financially.
Typically, you need to have at least 3 to 6 months of living expense in emergency funds. However, during the recession, 6 months may not be enough. If we are anticipating a recession, you need to have at least a year’s worth of living expense saved up. So, now is the time to start an emergency fund and contribute as much as possible.
Brainstorm ways you can have extra funds and work on building your safety net. This time might be a good time to have a line of credit as backing in case of emergencies. With MoneyTap line of credit, you can rest assured that your approved amount will be there to resuce you in your time of need and you can get an instant loan when needed. The great part is that you only pay interest on the amount you use.
Whether the economy is booming or is in recession, debt is damaging, whatsoever. But during a recession, it becomes a bigger problem, especially when you may be experiencing job loss or a massive decline in the value of your investments.
Try to pay off all your debts. If that’s not possible, pay down as many as you can. The more you pay off, the fewer payments you’ll have to make, and stronger will be your financial position.
During the recession, the unemployment rate goes up. No job in this world is 100% recession-proof. So, there’s no guarantee that you’ll go through the recession without any hiccups in your employment. The kind of skills you have right now may not be enough once the recession ends. So, it’s important that you take steps to make yourself more valuable. This can include adding new certifications, upgrading your skills, building new skills or training in your current profession to increase your value to your employer and even a competitor.
It’s hard to predict the future, but our economy is changing so dramatically that it can easily lead to a recession. But regardless of whether the storm is on the horizon, it’s always better stay prepared so if recession in 2020 does happen you are in a stronger financial position.