Are you prepared for the next global economic downturn? Here are 8 tips for you to get financially ready for any economic or financial crisis.
As the worldwide Covid-19 pandemic continues to rage, more businesses collapse and unemployment rates keep rising. One matter most people have in mind is…
Another global recession coming? If so, when? Or are we already in a recession? All the economic data appear to be pointing to this.
Although economists are still pondering the possibility of a downturn in the immediate future, it’s best to be cautious than sorry, especially for the normal working folks like you and me.
We can’t control and avoid a recession. So if you want to protect your financial position ahead of an economic crisis, do one thing. Be prepared by planning.
Get yourself ready to be recession-proof or at least to get through without serious financial harm via following the 8 tips below.
Tip #1: Invest in yourself to increase your earning capacity
How can you be more relevant or valuable to your employer? Are you labelled as the ‘go-to’ guy for solutions? Are you irreplaceable and an asset to your employer?
Mr Warren Buffett (who needs no introduction) goes to colleges often to teach and inspire pupils. One of his talks tells us the importance of our bodies and mind, to invest for a better future through ourselves and in education. He stated you are your greatest asset. Consider yourself as a treasured possession. He also said he will invest now in an excellent student for a certain percentage of his/her future earnings.
You would be valuable to yourself and society if you appreciate and grow yourself. How? Check your job path, then consider taking online classes that will improve your credentials. Find a mentor, a person with a higher position and wider experience in the same career.
Don’t wait to fix yourself up only when you are unemployed!
- If you are a salaried worker, begin concentrating on ‘performing -above-expectations’. Being an ‘irreplaceable asset’ is a much better label than a ‘potential layoff’ when cutbacks during recessions.
- If you are a businessman, create your client list and update your marketing strategy. To improve repeat revenue and draw potential buyers, concentrate on establishing a positive partnership with the clients.
Tip #2: Settle all your debts, especially high-interest loans
This seems logical, right? But sometimes logic does not translate to practice. Most people know the importance to prioritize debt payment in their financial plan. But in reality, it is not.
We must pay all debts. If you can’t, at least prioritize those higher interest rated debts first. Why is this important? If you ever face an economic downturn, the chances of you being laid off are 50% higher than now. Losing a job with no replacement income is a big no-no. Without a regular income, you will deplete your savings soon. Soon you have to sell your assets to meet living costs. Eventually, you could end up bankrupt and homeless!
This may sound unreal to you now. But, ask some homeless people and hear their stories.
Tip #3: Maintain An Emergency Fund of at least 6 months
Have you got an Emergency Fund?
Can you have access to money with ease if a catastrophic event happened today? According to a 2018 AKPK Report on Financial Behaviour and State of Financial Well-being of Malaysian Working Adult, more than half (53%) of those earning less than RM2,000 cannot afford RM1,000 emergency expenses.
The basic principle is to have set aside up to a half year of your monthly costs. Ideally, the more the better, perhaps enough for a year.
You can’t debate or argue with this. You MUST have an emergency fund! Start by listing down your common costs with essential needs at the highest priority. Then save up enough to support you for six months.
Tip #4: Cutting Down The Expenses
Analyse your expenses and look for less expensive options. Do this by listing down every single expense and the options. And then choose the best, focused on usefulness and cost.
When done, come out with a sensible budget you will follow. Hold the right amount of cash.
Be aware of what you will spend every dollar you have on. Don’t buy things that deteriorate in value. Do you need to change your old but functioning TV or that new extra car you’ve been eyeing? Quit attempting to dazzle your neighbors or friends.
Rather, put away your cash in investments instead since they can generate more money!
Tip #5: Increasing Your Income
You must do all that you can to protect yourself if you’re concerned about future difficult times. One way to do this is to increase your income in advance.
Pick a good side hustle or hunt for a position that pays better. We ‘re not asking you to leave your work today but grab it and run if you have a greater opportunity!
It’s faster to find a better career when you are still working. So try it out. Edit your CV, submit several applications and networking aggressively! Spending more time in social resources is of greater significance and quality than a resume.
When you can’t do all the above, evaluate your existing job. Give it twice as much, throw a bit more work into working hours and submit for the promotion. Aim for the month’s employee recognition and make sure your record and image are untainted at work. When job cuts occur they begin with the weakest ones.
Tips #6: Improve Your Credit Score
You may probably ask why should you care about your credit rating if the economy is going into recession? …the answer is prices.. assets prices will reduce dramatically during an economic downturn. But, interest rates will also reduce.
As prices have gone down, you may want to buy a property. However, getting a loan from banks would not be easy. Banks will only give loans to those who are creditworthy. Your credit score/rating must be in the top ranges before a bank grants you a loan.
Make sure you do these 3 things on your credit rating:
- periodically review your credit report,
- pay off debts before the deadlines, and
- keep a sharp eye on any fraudulent details that could ruin your ratings.
By vigilantly doing these, then during the hard economic times, you could still get loans should you need one.
Tip #7: Work on your financial mindset
Do you know you have a powerful weapon to help you succeed? It’s your mind. It could either develop you or tear you apart. Bracing your mind to be financially conscious for the inevitable recession is definitely crucial. Your emotions are pure things!
Begin by expressing appreciation towards those around you. Mindfulness, prayer, and breathing exercises have shown to lower stress and keep people healthy over the years. Listen to motivating podcasts and your mentor. Read-only positive headlines and ignore bad ones unless they have a clear impact on you. Be conscious of your thoughts that have had a negative impact on your everyday life.
How strong your personal finances aren’t reliant on loan fees, political parties, the securities exchanges, or some other powers. Though these components can have some impact, everybody can flourish in any marketplace! Remain positive, continue looking for opportunities, and consistently be prepared to thrive even during a downturn.
Continuously remind yourself no one circumstance will last! As Warren Buffett stated, during the 2008 downturn, ‘We’re still in a downturn, we will not be out of it in some time, however, we will get out in the long run.’
Tip #8: Keep up with the investing momentum
It won’t be clear when a downturn begins, but we easily see indications of its imminent appearance. Share prices will fall consistently. Unemployment rates keep going up. As this continues, panic selling emerged.
Instead of following the herd, you ought to INVEST. Famed investor Warren Buffett said years ago:
“Be fearful when others are greedy and to be greedy only when others are fearful.”
If every Tom, Dick, and Harry are selling and keeping the cash, it seems irrational to invest. But, actually it is the best thing to do! Costs will seem to have hit a record low, however, they can only go up from there, and that is the way you’ll bring in your money later on.
To successfully time the market is impossible. That implies you have to continue investing frequently to keep giving your investment the highest opportunity of outperforming. How? Automating it so it is on autopilot.
Consistently invest. If the rebound comes, you’re poised for success. Invest for the long term, though.
Invest over the next few months with capital you don’t really require. Many individuals earn a profit while their markets are low. You could be one of it too! We should see the probable recession to come as a splendid opportunity instead of a tragedy.
Nobody can foresee precisely when a downturn begins or finishes. But you can prepare yourself now to escape most of its nightmarish consequences.
Stock markets go up and down and up again like a roller coaster. Jobs changes. However, if you look back, every downturn finished in an upswing. Getting yourself ready now can assist you with enduring its most awful effects and come out of it unscathed.
Time is of utmost importance. Whether you ‘re concerned about a recession, these eight tips should help you create a stable financial base whatever the economic situation.
You May Also Like
- 5 Steps To Manage Your Finances In The New Normal
- 6 Basic Money Actions to Take During Time of Financial Uncertainty
- Finding Financial Certainty in Uncertain Times
- Seeking Returns in Times of Uncertainties
- 3 Ways To Minimise Financial Impact During This Difficult Time
Do you have any other tips to share?