5 Ways to Prepare for a Recession
In the news today, we are frequently hearing about the potential of a recession. It can be unsettling and anxiety inducing when we hear it. However, we have learned that when we feel worried and anxious, it is a good idea to get a plan in place.
Having a plan during unsettling times is never a bad idea and can help to ease any fear. But first, what exactly is a recession?
Simply put, a recession is a downturn in the economy and historically, it has been defined as two consecutive quarters of decline in the US’ real GDP and indicates slow economic growth.
Recessions are a normal part of the economy and it does not last forever. You can't control when a recession happens, but you can prepare yourself and your family.
Here are a few tips to prepare:
1. Increase emergency savings
It's recommended to have at least 3-6 months of expenses saved, for an unexpected event. If you have a 3-month emergency fund, consider bumping it up to 6 months; if you have 6 months of expenses saved, bump it up to 1 year. This will help you ride out job losses until you can replace that income.
2. Follow a monthly budget and monitor expenses:
A simple budget gives you control of your money and helps you know what exactly is coming in and out of your bank account. Tracking your expenses helps to easily identify categories in your budget where you are overspending so that you can adjust your spending before it gets out of control.
3. Keep your resume up to date
This will come in handy in the event of a job loss due to layoffs. You will be ready to start applying to jobs quickly.
Upskilling is simply improving your skills or attaining new ones, altogether. Continuous learning is vital and in a recession when job lay offs are highly likely, it is important to have sought after skills to stay competitive in the job market.
5. Invest for the long term
Market fluctuations are a normal part of investing. Consider diversifying your investments so that your investments are spread across various companies to ride the ups and downs in the market. Stay the course, investing for the long term in diversified assets is the best approach.
We can't control when a recession happens but we can control how we manage our money and time. Take the steps necessary today so that you can weather all storms of tomorrow. It all starts with intention.