Jason is a longtime Investor and an advocate for having a personal finance strategy and personal savings to have financial freedom.
If you are reading this in June 2022, then you might be concerned about a recession coming to the United States. Some speculate this will be far worse than the 2008 recession, even some going as far to say the United States will enter a depression that it cannot recover from. Regardless how you feel on the subject or what position you are in to combat a looming recession, we will go over some tips on how you can prepare for today and what you can do leading up to the evitable recessions of the future.
Pay off Variable Interest Debts
This was one of the big issues back in the 2008 recession. Many people had variable interest rates on their mortgages, and when the housing market crashed, interest rates went up, and people struggled to make payments. This can still apply today and in addition to mortgages, credit cards and other personal loans are to be factored in. Even if the Federal Reserve increases interest rates by a small margin, banks and credit card companies have a habit of raising their interest rates substantially onto the consumer. This means you will be paying even more on your debt in interest than before, and with inflation eating away at people's incomes, more of your money goes into paying debt and less you will have for you. Do not be a victim of bad debt and letting the system take advantage of you. Pay these off aggressively.
For the future, keep an eye out for fixed interest rates, and take note as to what debts and loans you have that do not have this.
Have a Reasonable Savings Cushion
While we live in a world where interest rates on savings do not keep up with inflation and hoarding cash in savings is not ultimately going to get you ahead financially, it is always a good idea to have a savings on hand for emergency purposes or for upcoming opportunities. Ideally, you want to have at least six months of your monthly expenses built up in the event you lose a job, business goes under, etc. You need this to protect yourself at all times in the event of setbacks. Otherwise, you are walking a thin line between staying afloat or not.
During times of recessions, in addition to setbacks, new opportunities are opened. The saying goes millionaires are made during recessions, and perhaps you can become the next millionaire or achieve financial freedom by taking advantage of the panic. Doing this requires having some money on hand, and perhaps not a lot of it. Dreaming of that business you wanted to start, or buying that property you know you can turn around and sell for double? This might be your opportunity.
Review All Your Investments
For people that have investments, during times of recession is when they are tested to see if their strategies really work or not and if their knowledge on investing was authentic or not. Throughout 2020, many financial gurus on YouTube were showing off how they became wealthy in the market nearly overnight, during a time when the markets were at historical highs and everyone was making money. Now with a looming recession, this will test how well they really performed, and see if your favorite financial guru on YouTube or anywhere for that matter really knew what they were doing.
Take the time to review your investments and see if they are positioned where you want them to be. Adjust and pivot if need be, and have that long-term vision in mind. If you are not in a good position, learn what you did right and what you did wrong and be prepared for any future recessions.
Keep an Eye Out for More Opportunities
I mentioned a little earlier about keeping a savings cushion to have for new opportunities, but let's elaborate more on this. Groupon, Instagram, Uber, and WhatsApp all started during a recession. Startup companies are going to be born in the next recession and will eventually become as mainstream as the four mentioned above. If you are looking to start a business of any kind, this is your opportunity.
If you are an investor, this is your time to buy stocks you have been eyeing or properties you have wanted to flip at discount price. If you have the cash on hand and can weather the storm, you will come out ahead of this. If you are interested in getting started investing in the market, I will write more on that in another article.
If you are an employee, perhaps this is your time to switch jobs or to evaluate how safe your position is, or consider a complete career change. With all the work shortages in 2022, it is an employees market for now, take advantage of this. While many companies threaten job cuts, do not let this deter you from seeking more opportunities.
Do Not Panic
Many people have the habit of panicking during times of economic and financial instability. The media feeds into this panic and some of our so-called financial advisors can give bad financial advice during times of uncertainty. If you have a strategy that works for you and it has proven itself to work during times of uncertainty, ignore the noise and follow through with your long-term goals. Just as many millionaires are made during recessions, many are also lost in the process because they panic. Historically, economies come back stronger after recessions and this time will be no different. Focus on your long-term vison and once you know your strategy works for you, ride the wave.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2022 Jason