The saying that ‘we will cross the bridge when we come to it’ does not work financially. Everyone can end up in a financial mess, no matter the size of their income if they don’t manage their finances successfully. Today‘s economies experience recessions and booms; everyone should be prepared for the best and the worst. Recessions come and go, they also vary in depth and this makes it difficult to adapt to them. They bring job losses, company closures, downsizing, investment losses, and loan and mortgage defaults. It is important to remember during periods of economic boom that the good times will certainly not last forever and that someday the recession will come. Try by all means to make yourself recession proof.
How to survive a recession?
1) Planning and budgeting before the recession
Before you go on a spending spree, always plan your finances. Planning your finances will help you get rid of unnecessary and costly debts and enable you to save. Pay off your high interest debts first and start saving when you have finished paying off all your interest bearing debt. It is the guys who financially plan their lives who are usually recession proof. Invest in different types of investments to spread your risk. Have some of the funds in easily accessible accounts in case of emergencies. Planning your finances should not be a once off thing; it should be done periodically. If you do it monthly you will always have a good grasp of your finances. Furthermore, if you plan your finances regularly, you will notice that you are going into a recession early. You will be better prepared for the ‘disaster’ than those whose are caught by surprise. You should always be prepared to move into another job, in case you loose the one you have. Diversify your qualifications if possible.
2) When the recession comes
Continue to plan your finances. Make sure your money in invested where it will have minimal impact from the recession. If at all, you have lots of money, this is the time to buy stocks because stocks prices are usually depressed in recessions. Since you already know your income, scale down on your expenses. Do away with some of the things you could afford during the good times. Use as little money as possible because you don’t know how long the recession is going to last.
3) Caught napping
Always remember, a recession is not the end of the world. It’s not too late to start now. Plan how you are going to stretch your meager earnings over your expenses. If you are unfortunate enough to loose your job, sit down and weigh your alternatives. Do you have a chance of getting another job with the same income? If your occupation has been hit hard by the recession, can you move to another occupation? Can you afford to pay your rent? If not, move in with relatives. Do you have any savings to fall back on? If yes, use it sparingly.
4) Look for opportunities
While there are good reasons to loathe a recession, it does not mean that there no opportunities out there. Look out for opportunities which you can take advantage of e.g. used cars sell better during recessions, housing prices are usually depressed.
While we can’t all be ‘recession proof’, we can be better prepared for it. ‘Forewarned is forearmed’.