If you want to take control of your financial security during a recession then you must read our guide on how to prepare for a recession - Check it out!!
For the past 2.5 years, besides the pandemic and the struggles of lockdown, one thing that’s still disturbing the world is the recession.
Not a new term, is it? Endless debates and discussions all over the media must have tattooed the word in your brain, and it's important to prepare for recession to protect your finances.
If you aren’t living under a rock, you’ll know that this is the reason why issues of job security, financial planning, better economic policies, etc., are the hot ones!
As a consumer, perhaps the most drastic fact about a recession is the price rise. Inflation never gets good glances and in this period where financial downfalls are common, it definitely isn’t something to manifest for.
For definition, recession is the economic downfall that lasts longer than a few months in the economy and leads to production, consumption, employment and income disturbances.
Clearly, anyone would wish to not get caught up in this trap and ruin their financial health.
Recession can take down the whole world economy and we are all fresh witnesses of this. So, here’s how you can actually prepare for a recession and secure your long-term financial security.
Steps to get prepared to Tackle the Recession
1. Gain more in-demand job skills- prevent layoffs
Your job might be your prime source of income.
Recession directly affects employment and that is why we often see companies lay off more workers during recessions.
Plus, market conditions change drastically during and after recessions. There is often the need for new in-demand specializations that might not require a college degree.
Fields like graphic design, UX design, front-end developers, etc., can be mastered through online courses. You can, therefore, easily enhance your skill set and polish your existing skills at the same time. So if you even lose a job, your skill set can ensure that you do not remain unemployed for too long.
With your carefully planned budget and enhanced in-demand skills, you can easily overcome the damages caused by the recession.
2. Start Saving at the earliest & maintain your Emergency Fund
When you are stuck in a financial crisis or you feel that you may soon not have good financial health, one thing that can save you are your savings. While savings are a good cure for rainy days of your finances, they also act as a good source of precaution too.
When you regularly maintain savings, and emergency funds and follow a strategic budget, there is no way that phenomena like recession can do you much harm. Therefore, start saving at the earliest. Take a hard look at your monthly budget and cut down on your expenditures.
Build a strong emergency fund with stable investments like gold. If there aren't any financially turbulent times, your savings will still ensure you have a strong backup to rely upon. If there are turbulent times, they can help you overcome them easily. Either way, it's a win-win for you!
3. Get done with your credit card & other debts
Be it recession or just a normal day in the economy, debts aren’t good for your financial security.
When situations in the market grow turbulent, you’ll know that it's time to take proper steps and prepare to avoid personal financial havoc. And what else can surpass the idea of getting rid of your debt first?
Your situation can become difficult to handle especially if you are dealing with high-interest and variable-rate debts. The former generally rises from your accumulated credit card balances.
Even if the bank loan interest is somehow low, credit card interest rates and the late-fee are generally high! They can go from costing you hundreds to thousands real quick.
Therefore, when you feel that there might be drastic changes in the market and recession might just be knocking on the door, get that debt out of your budget! You do not need any additional financial burden and at least not when there is an uncertainty as big as recession.
4. Invest, invest and invest
Perhaps the best thing that helps you sustain any financial turmoil is effective investments.
During recession, when the stock market plunges and your money might go down, sticking to your current investments and continuing with the timely cycle of the same can save your financial health in the long run.
Financial experts often warn about immediate withdrawal of funds from the stock market when recession persists. The person is perhaps that when situations start to get normalized, the ones who continued their investments are the only ones able to cope up.
One important thing about your investment portfolio is that it must be risk balanced. You must not invest alone in stocks and equities and mutual funds, rather, along with them, you must invest in stable investment options like NPS, PPF, etc.
5. Diversify your Income Sources & improve your Networking
Lastly, since there are problems of job security and money loss during a recession, to prepare better for it, you must not stick to one income source.
Alongside your job, find your niche and gain certification for the same. Generate your personal brand and get set with your own side gig. Even with your creative habits, you can develop ways to generate additional income.
While getting work opportunities might still be difficult even after you would have mastered the skills, networking can do the job for you.
You must have heard about platforms like LinkedIn. You find thousands of recruiters and clients for your skill there. So, build a profile and start creating content today!
Preparing for the recession is necessary to avoid personal financial turmoil. From securing your job to diversifying your income sources, from saving effectively to investing actively- everything is necessary to tackle the recession.
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