How to Prepare for a Recession
Do you know how to prepare for a recession? Have you considered getting ready should a recession hit?
So, what is a recession exactly? Well, it’s a time (usually at least 6 months) where the economy doesn’t grow, but instead shrinks. Economic activity slows down, and jobs may be lost. Prices for things may increase as well. Basically, recessions are no fun at all and can be very stressful.
Live long enough and you are bound to experience a recession. The average length of a recession usually lasts about a year and a half. The longest recession, and the worst of course was The Great Depression in 1929 which lasted many years and left people struggling to survive. When we think about people being resourceful and learning how to do what they had to do just to prevent their families from starving we think about The Great Depression.
Thankfully we haven’t experienced a recession like that since then, but we have had many more recessions on smaller scales. The thought of a recession hitting can be pretty nerve wracking. Will you have enough money to pay your bills? Will your family be able to afford their basic needs? Will you go into deep debt just trying to get by? These thoughts and more may have crossed your mind.
Right now there’s a lot of talk about whether we will see a recession this year or soon. The truth is, we should always work towards being prepared during hard times, but with talk of a recession it definitely is a good idea to start making some changes to give you and your family a better chance of being financially stable if one hits.
So, today I wanted to talk about what you can do to prepare for a recession. Of course, we can’t plan for everything, but even just being a little more ready can help us.
HOW TO PREPARE FOR A RECESSION
Put money away.
I’ve talked before about how building up an emergency fund is super important. It’s especially important when there’s talk about a recession.
The experts often recommend that you have 6 months of living expenses put away. Understandably, not everyone can do that but that doesn’t mean it’s hopeless. Obviously a bigger emergency fund is better, but if you can’t do that, don’t get discouraged and decide to not even bother. Even 500 dollars in a savings account can help you.
Start putting away a bit of money each paycheque, even if it’s only 10-20 dollars. Something is ALWAYS better than nothing and over time it will add up and be there when you need it.
Learn how to be self-sufficient
Learning skills that help you become more self-reliant are always beneficial. Learning to do things like gardening, preserving the harvest, fixing your clothes or other things around the house, and more can help you when you may not be able to afford all that you need.
Learning to do those things doesn’t mean you have to do them all the time, but just knowing those skills in case of a financial crisis will allow you to use what you know when needed.
You don’t need to feel overwhelmed at learning these types of things if you never learning them growing up or didn’t have anyone to teach you. The internet is a wealth of information. I’ve learned how to can, how to sew, how to garden, and how to homestead from tutorials online and videos on YouTube.
Don’t rack up anymore debt
If you have debt, (and even if you don’t), if a recession is coming the last thing you want to do is to go further into debt. Work hard to avoid adding any debt and make an effort to pay down any debt you do have leading up to a recession. The less debt you have the more wiggle room you will have in your budget during a recession to pay for your basic needs.
Consider a side hustle.
The truth is, no matter where you work, no job is fully secure. Yes, there are jobs that have a bit more security than others, but I’ve watched many people work at the same company for their lifetime only to be handed a pink slip a few years before retirement.
Diversifying your income can be a really good idea. Actually, in the world of blogging that’s what all the experts drill into you. Having income come from various streams means that if one income stream disappears, you aren’t out of all your money.
There are so many different side hustles you can do. You can find one out of the home, like babysitting, or petsitting, or doing something like odd jobs for people, or you can work from home as a blogger, virtual assistant, or freelancer. Check out this post here, or this post on different side hustles you can do.
The threat of a recession is a great time to make sure your resume is up to date as well in case you were to lose your job and needed to look for something new.
Analyze your expenses.
Is there something in your expenses that you can cut back on? Even if you aren’t ready to at the moment, it’s a good idea to look over your budget and decide what could go should you be unable to afford all your day-to-day expenses.
Things that aren’t necessities are usually the first thing that can go. Then you can look at your necessary expenses and decide whether there is any way you can save money on them.
This may be saving money on your grocery bill by couponing and shopping at budget stores, or it may mean cutting back on electricity and heat by being more aware and careful of how much you are using and learning to conserve energy.
Practice living within your means
This is something you should be doing whether you are preparing for a recession or not, but the threat of a recession makes it that much more important. If you overspend and aren’t living within your means, it’s time to change things.
Cut back on spending and make sure your budget reflects accurate money coming in and money going out. In the end you want to make sure you are bringing in more than what you are spending.
SURVIVE A RECESSION WITH PREPARATION
The thought of a recession can be scary, but if you are prepared the chances are that you will fare much better. The best thing you can do is make a plan and take control of your finances BEFORE a recession hits, not during the recession. You may find that a recession barely has any affect on you if your finances are in good shape.
