After almost a decade of steady economic growth, Americans are starting to worry that we may be headed for a recession. The economy has been on the rise since the Great Recession which ended in 2009, the expansion can’t go on forever. How do I know? Because that’s the way that the economy works.
A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP for two consecutive quarters. GDP stands for the Gross Domestic Product meaning the total value of goods produced and services provided in a country during one year.
The Truth is, no one can accurately forecast the timing of the next recession, but a downturn is part of a normal economic cycle. Since the end of World War II, there have been 11 recessions. Are you ready to withstand the fallout from a crashing economy? Here are five “nuggets” to help you survive the next recession:
Boost Your Savings
If you are worried that your job won’t last through the next downturn, Start building your cash reserves that can cover at least 6 months of living expenses. If you lose your job during a recession, the money you save now can help cover your expenses as you look for work.
Create a Budget
Your first order of business is finding out exactly how much you’re spending each month and cut out unnecessary items. Once you see where all your money is going, it’s easier to find big and small ways to save. You can do this by reviewing your bank statements, this can help you see exactly where your money is going. Some of us think we spend less than we really do, this can be eye-opening!
Buildup Your Emergency Fund
We must always factor in unexpected events in our budget, such as unplanned car repairs. Job loss can also make it difficult to pay day-to-day expenses. Beefing up your emergency fund can make it possible for you to still afford your necessities while you search for a new position. Focus on loading up your emergency fund with at least 6 month’s worth of living expenses. After that, pay off your debt.
After boosting your savings, it would be a great time to knock off debt. This will allow you to save hundreds of dollars each month. If you need another incentive, consider how hard it will be to pay off debt if your job and income disappear in a recession, just think of the peace of mind you would have to have less or no debt!
Pick Up a Side Hustle
Another great way to make yourself recession-proof is to get side hustle where you can use that money to pay off debt and apply to your savings. Maybe you are really good at handyman services. You may even decide to rent out your guestroom on Airbnb, drive for Uber, deliver for Amazon Flex, deliver food, or freelance. There are many side hustles that you can take advantage of to help you stay afloat.
But regardless of whether the storm is on the horizon or not, it’s always a good time to make sure you’re financially secure. A recession may be on the way, or we may have another decade of financial growth. Still, taking steps to prepare for a recession now will help your finances no matter when the next recession happens.