4 Ways to Prepare for a Recession and Make Sure You'll Be On Top of Your Game When the Market Turns
So, you've been reading on the news how the economy is headed into a recession, and how times are going to get hard.
For those of us who remember the Great Recession, we know how bad these times can be.
I saw first hand many friends and family members get wiped out to the point of losing their homes, jobs, businesses, and in many cases causing divorces.
While recessions can be scary its important not to live in fear.
Im going to share what a recession is in an easy to understand way and how you can prepare so you can thrive.
What is a Recession?
A recession is defined as two consecutive quarters of negative GDP growth.
The GDP is the total value of goods and services produced within an economy.
Another way to think about it is a measure of how much money an economy generates in one year.
A recession typically lasts for six months to two years, but can last for up to 10 years if the country goes through what's called "stagflation."
1. Cash Cushion for Those Tough Times in the Future
Preparing for a recession is important because it can happen at any time.
Plan for the worst.
First way is to start saving as much money as possible.
Have enough cash in the bank to cover expenses for six months or more.
Next make sure that your credit card limit is below what you owe.
Avoid taking on new debt. If you're already in debt, try to consolidate your loans and get a lower interest rate.
The key In tough economic times, is to plan for the future.
If you have savings, you will be able to maintain your lifestyle during tough times and even invest in property.
2. Buy Low & Sell High
During a recession, the prices of stocks, real estate, and other assets goes down fast.
Those who prepare can buy them at a discounted price.
Then they are able to sell and make a ton of money when the economy recovers.
This strategy is called "buy low, sell high". It's used in order to maximize profit when the economy improves.
One of the best ways to take advantage of a recession is to invest in real estate.
When there are fewer buyers, the prices drop and it becomes easier to find a home for less than what they are worth.
This is a simple strategy that can be applied to stocks, real estate, and at times even businesses.
3. Investing in Skills and Knowledge that will be Valuable in Recessions
During recessions, people often stop investing in themselves and their skills due to fear
Everyone is scared and stressed.
They either spend less time on education or take fewer risks on new ventures.
This is not the time to stop investing in yourself.
People who invest in themselves during recessions are the ones who are most likely to succeed when the economy recovers.
This is because they have a skill set that will be valuable no matter what happens.
Skills and knowledge that will be valuable in recessions:
Its a great time to reinvent yourself and work on skills that will pay off in the long term.
4. Stay Flexible and Keep Re-Evaluating Your Plans Constantly as the Market Changes
One of the best way to prepare for a recession is to stay flexible and keep re-evaluating your plans constantly.
This will help you to adjust your plan as the market changes.
You should also make sure that you have a plan for every possible scenario, including the worst case scenario.
When preparing for a recession, you should not restrict yourself to one strategy or one market.
You should be flexible and try out different strategies so that you are more likely to succeed as things can change fast.
We should not live in fear of a recession. We should prepare for it.
We should invest in skills we can use to find work and save money.
And we should keep flexible, so that we are prepared for the next opportunity that may come our way.
The recession is coming.
Prepare yourself by learning new skills, saving money, and staying flexible.