Menu Close

How to Prepare for a Recession the Smart Way

how to prepare for a recession

Want To Earn Easy Money?

How to prepare for a recession? It’s one of the big, scary, words that the financial press likes to throw around. But what does “recession” actually mean, and what does it mean for you and your financial security?

In simple terms, a recession is when there have been two (or more) successive quarters in which the country has experienced negative economic growth. Recessions are linked to a number of economic nasties: unemployment tends to increase because businesses stop hiring, and there are usually a few large casualties, as businesses that were borderline before the recession fall over.

The stock market also tends to experience general declines, meaning that people with investment portfolios (including superannuation) usually make losses. Property prices can also decline, so investors in property can also end up out of pocket. But a recession doesn’t mean poverty for all. There is plenty you can do to protect yourself from the impact of a recession:

Want free money?

  • Aspiration: Want to get spotted a $100 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $100 just for opening a new debit card. There’s no catch. This bank account is legit and only takes two minutes to sign up for an account.

Build an emergency fund

emergency fund

The simplest, but most effective that you can do to protect yourself from a recession is to have an emergency fund, that can protect you against a loss of work, a drop in your investment’s income, or other financial consequences.

An emergency fund is a simple cash bank account that has, ideally, six month’s worth of your expenses within it. That pool of money can be drawn on to cover the cost of big, unexpected bills or income losses until you can get back on to your feet. Cash is insulated against recessions because while inflation (an increase in prices for goods and services) is a potential issue, your own cash reserves aren’t liable to change with market forces.

Reduce your debt

how to manage debt

Debt is a big problem during a recession. The less debt you have the lower the risk of a default and, importantly, the better the borrowing power you have if it becomes absolutely necessary to take on new debt. The more debts you have out there, in credit cards, mortgages, personal loans and the like, the weaker your credit rating is going to be.

The best pathway to minimizing debt is to start the process before the recession and to learn how to break bad habits. Choose one of your debts (the higher interest credit cards being the best first choice), and pay as much over the minimum repayment as you can each month.

In that way, you’ll find that you pay it down quickly, allowing you to remove it, cut up the card, and then move on to the next debt. That systematic approach is the quickest way to gain control over your finances.

Make sure that you’re covered

Games That Pay You To Play - Yes, We're Serious
These 3 apps will PAY YOU to play games on your mobile device:

  1. Mistplay (Android) - If you have an android device, you can download this app and start getting cash rewards for playing new games.
  2. Solitaire Cube (iOS) - Earning money by playing games on your phone sounds like a dream. But this app really pays you for playing solitaire with cash rewards.
  3. Lucktastic (Android)  - This free app offers the same daily scratch-off cards that you find at your local convenience store — but here you can play

how to make 400 dollars fast

The really expensive things in life (and death) are almost always more expensive than you might think, but thankfully they can all be insured against. Whether it’s medical, home and contents, a funeral, or otherwise, the bill from one of these tragedies can become all the more painful if it occurs through a recession, and you’re not covered by insurance.

During a recession, big “surprise” costs and one-off expenses tend to have a greater impact. They’ll eat into your emergency reserves, which you might already be relying on to handle a loss of income.

The alternative is to take on additional debt to cover them, but that again reduces your capacity to handle the next surprise expense, and lenders tend to circle the wagons during a recession — the last thing you need is to find out that no one will lend you the money you need for an operation.

Upskill yourself before the recession

make $100 fast

As already discussed, during a recession, people tend to lose their jobs, and the job market dries up with that. The best way to make sure you are able to navigate through the competitive, tight jobs market during a recession is to make sure you’re able to take on a wider range of jobs and to make sure that your skills are ahead of everyone else.

Before a recession hits it’s a good idea to upskill. Take on some new courses, or do some volunteer work in an area that will give you some new experiences to add to the resume. Start a side project that shows you’ve got a broader range of skills than your base job, and try to develop a mix of practical, hands-on skills, and office-based skills.

Finally, do some research into the jobs that are relatively insulated against a recession (as in, jobs in areas that people still need to spend money on, even when there isn’t money to go around), and make sure that you have skills in those fields. It’s the “nice to have” jobs that tend to go first during a recession.

Final remarks

A recession is nothing that any individual needs to lose sleep over, despite what the headlines say. Economies cannot sustain indefinite growth. There are times where a retraction is necessary, to bring balance back to the market. Yes, a recession poses risks to people’s jobs and livelihoods, but with careful planning, it’s nothing that you won’t be able to insulate yourself against.

Latest posts by Luke Fitzpatrick (see all)

Want free money?

  • Robinhood is a free investing app for your phone. I really mean free all around – free to join and they don’t charge any fees to buy or sell the stock. You can get a share of stock like Apple, Ford, or Sprint for free when you join through this link. The value of the free share may be anywhere between $2.50 and $500 and fluctuates based on market movements. You’ve got nothing to lose.

Best Personal Loan Options for 2020

CompanyLoan AmountAPR
crediblecredible trustpilot$1,000 to $100,0004.99% - 35.99%

GET MY RATE

sofi personal loanSoFi personal loan table

$5,000 to $100,0005.99% - 16.99%

GET MY RATE

upgrade personal loan tableupgrade trust pilot

$1,000 to $35,0007.99% - 35.89%

GET MY RATE

fiona personal loan tablefiona trust pilot$1,000 to $100,0004.99% - 35.99%

GET MY RATE

zippyloanfiona trust pilot
$100 to $15,0005.99% - 35.99%

GET MY RATE

You May Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *