No one can accurately predict when the next recession is going to happen, even experienced economists. During this hard economic period, lots of businesses file for bankruptcy, the unemployment rate skyrockets, people stop buying as much, and people lose their homes or vehicles. For that reason, it is necessary to always be prepared for the worst so that you don’t need to depend on the government, other people, or loans to put yourself back together.
Diversify Your Investments
The first thing you should know before investing is knowing your investor profile. There are some questions you need to ask yourself, such as “what is my investment goal?” “What is my degree of risk tolerance?”, and “How long do I want to keep my investments?” If you don’t want to take much risk, you should consider investing high-yield savings accounts, certificates of deposit, treasury bills, money market funds, or even dividend-paying stocks.
Ramp Up Your Professional Life
During a recession, one of the first things a company will do is firing a considerable number of employees to reduce expenses. That’s why you should work on making yourself valuable to your company. Investing in courses to master your skills is essential if you want to differentiate yourself from the pack. You can also ramp up your professional life by making connections, building a network, either online using social media like LinkedIn, or in real life, going to meetings and conferences.
Have Multiple Streams of Income
As a rule of thumb, you should not rely on only one source of income, if possible. That way, if you lose a source of income, the others will help you get back on your feet. You can have multiple streams of income by getting a second job, renting a room or a property, or working on offering your services on freelance websites.
[Read More: 6 Legit Passive Income Ideas For 2020]
Increase Your Emergency Fund Savings
If you don’t have an emergency fund yet, you should definitely start one right now. In case you already have one, it is a good idea to start allocating more money there. During normal times, specialists recommend having three to six months in expenses in investments with high liquidity, meaning you can get your money back quickly. In the middle of a recession, however, it’s crucial to have at least twelve months of expenses in an emergency fund, which will give you plenty of time, since it will be harder to find a job or another source of income. Having automatic transfers is a great idea for people who have trouble saving money since it takes away the effort of having to remember to do the transfer yourself.
[Read More: How to Start an Emergency Fund Step By Step]
Decrease Your Expenses
During an economic decline, it becomes a lot more important to learn to live below your means. Try your best not to make impulse purchases, or buy anything you can live without during the recession because you will probably need the money promptly for more essential things. You can also look for cheaper alternatives, or store-branded grocery items for things you need in order to save some money, or even use apps like Trim to save money on your monthly bills, insurance, and subscriptions.