It is never too early to begin preparing for an economic downturn. What you do today can save you tomorrow. If you weren’t prepared for the coronavirus disruption be sure to also share this with a loved one. Here’s how to better prepare yourself for the next recession.
Pay Off Big Debt
One way to better prepare yourself for the next recession is to pay off big debt. Paying off debt will reduce the amount of monthly payments you have which will result in having more funds available to save or invest.
Paying off debt also lifts the weight off your shoulders knowing you don’t owe any parties anything. Pay off your vehicle or any open credit cards. If you have a lot of debt find out what strategy we suggest using when it comes down to paying thousands in debt here.
Have An Emergency Fund
Having an emergency fund is one of the single most effective ways to better prepare yourself for the next recession. Think of your emergency fund as a net from which you can fall on should things disrupt your plans. Recessions can lead to several hardships including the loss of a job or business. Having an emergency fund allows you to have access to capital in the event that the worse case scenario occurs in your financial world.
If you’re stuck on exactly how to create an emergency fund read about how to start it here. Franknez.com walks you through on creating a goal and then having your savings work for you so that your money multiplies through compound interest.
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Live Below Your Means
A great suggestions as to how you can better prepare yourself for the next recession is to live below your means. So what exactly does it mean to live below your means?
To live below your means is to live significantly below the threshold of your annual income.
Living below your means allows you to have financial breathing room. As a result, you’re able to save more money and increase the amount dedicated to your emergency fund. Here are some ways on how you can live below your means:
- Downsize your home if you don’t need the ‘excess’ space.
- The new vehicle can wait (practice delayed gratification)
- Don’t over-indulge in jewelry or high fashion clothing (there’s a time for it)
- Have less takeout (keep it in moderation – set a budget)
- Resist the new gadgets – make due with the current (for now)
When you live below your means you essentially grant yourself access to manageable monetary means. Prepare yourself for the next recession by eliminating the stress of going paycheck to paycheck.
Budgeting in general is a great winner habit to have. Budgeting long-term will help you achieve your savings goals and keep you living below your means. A great way to keep track of your expenses is to frequently log in to your bank account(s) and build awareness of where your money is going. We also suggest downloading the app MINT by Intuit. It tracks down your expenses and keeps record of all your accounts. It makes it super easy to keep quick tabs on your accounts.
Don’t Depend On One Source Of Income
What occurs when you depend on one source of income and then all of a sudden it’s completely gone or cut in half? This is what happened to 22 million Americans who filed for unemployment during the coronavirus pandemic.
Learn to better prepare yourself for the next recession by acquiring additional skills and knowledge and learn how to create more than one source of discretionary income. Franknez.com has posts on how to start an online business and grow it, how to earn passive income, how to start a blog, side hustle ideas & so much more. Be sure to subscribe to our newsletter to be notified when new posts are published!
Prepare yourself for the next recession by generating income from a variety of sources.
Tip: By acquiring multiple sources of income you ensure yourself financial growth and financial security.
Develop A High Income Skill
What does it mean to develop a high income skill? This means earning a promotion, developing skills to attract higher paying opportunities, selling more, or becoming involved in anything that will increase your current income.
By increasing your income you gain monetary means to pay off debt and save money for a rainy day. This is a great way to prepare yourself for another worse case scenario such as a disastrous recession. If it becomes too difficult to develop multiple sources of income or it’s not within your time limitations to do so, developing a high income skill can certainly be a great way to compensate.
Tip: Do not spend more as you earn more.
Be sure you continue to live below your means as you increase your income. You will have breathing room and gain the confidence to face any financial challenge that comes your way. If you find yourself in need of motivation we suggest reading 10X by Grant Cardone. This book discusses how you can increase your income and meet your goals by essentially putting in 10X amount of effort in everything you do. Grab the book here.
Choose Your Industry Well
One way you can better prepare yourself for the next recession is to choose your industry well. Take a look at the industries that thrived during the coronavirus pandemic vs the ones that didn’t. This is a sure way to identify which sectors are a ‘safer’ career choice.
Industries that thrive during recessions include:
- Utility Companies
- Funeral Services
- Courier / Freight
- Online Businesses
Become recession proof by choosing a great career that won’t die down during an economic distress.
Increase Your Credit Score
The people who are getting approved for 0% APR credit cards and for home loans are those with a great credit scores. Keep in mind, recessions are also the time to learn how to identify new opportunities. Qualifying for an affordable home while the market is low could be your time to make that move; it might not. Perhaps a 0% APR credit card can help eliminate other credit card debt and help you further your personal finances. A high credit score opens opportunity, even during a recession. Start building your credit now; your future self will thank you.
It would be wise to prepare yourself for the next recession by increasing your credit score due to the opportunities that open up with credit. Read: How To Increase Your Credit Score | Reach Excellent.
Diversify Your Investments
Another tip on how to better prepare yourself for the next recession is to diversify your investments. Don’t keep all your eggs in one basket. Franknez.com has posts on how to earn interest from a high yielding savings or money market account, how start an online business, and how to invest in the stock market step by step!
Diversify your investments by allowing your money to work for you in a variety of ways without you having to put up with much maintenance. This strategy will require you to take some personal risks though it isn’t as scary as it actually sounds! Risk plays a big part in securing your financial future. Prepare yourself for the next recession by learning this important wealth building skill.
Here are some ways you can prepare for a recession by diversifying your income:
- Move money into a market or high yielding savings account
- Build a portfolio with index funds and ETFs (stocks)
- Set money aside in a personal savings account
- Stack your checking account
Understand The Importance Of Networking
Learn to identify people of value who can play an important role in your life when it comes to health, career, finances, mentorship, and partnerships. It is important to build relationships with people in these categories because they become connections. These links of relationships are known as a network.
Better prepare yourself for the next recession by building a strong network as it can prove useful during the times of hardships. If you lose your job you might know someone you networked with who might be able to help. Whether its recommending you to an employer or even going to the greater lengths of personally hiring you, networking opens opportunities.
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