A recession, though unpredictable in its occurrence, is constantly in the back of people’s minds, especially when the murmurs begin to surface that one is fast approaching. It is an unavoidable factor within the economy’s cycle, popping up from time to time, and one is anticipated in the near future.
Defined as a period of considerable economic slumping, a recession lingers longer than two consecutive quarters and everyone is susceptible to its negative effects. But there are a few precautionary measures that one can take to protect themselves and minimize the agony during a recession. Kevwe Yerifor, the Chief Investment Officer for Capital Intell, has outlined a few steps that are applicable for people of all ages and capable of keeping various financial goals intact.
Understand Your Cash Flow
Kevwe Yerifor states that you must realize where you are situated, financially, in order to ready yourself for a potential economic decline. You can calculate your cash flow (how much money you are earning against the amount that is being spent) via a number of free online tools, such as Mint.
Do this by linking your accounts, then the software will track and categorize your transactions. Staying on top of your cash flow will reduce financial stress because you will be aware of the big picture, what type of revenue you need to secure, minimally, to balance out your monthly demands. Get ahead by establishing specific budget goals and seeking out opportunities to decrease your costs or boost savings.
Have An Emergency Fund Set Up
An emergency fund is one of the finest solutions to lean on in the event of financial difficulties that stem from a recession. You can depend on those funds, avoiding high-interest debt from the credit card companies, in a pinch. Kevwe Yerifor recommends putting aside three to six months’ worth of living expenses, which is only to be utilized in a genuine emergency situation.
Losing your job in a recession is a harsh reality that you should prepare for, as people are often laid off unexpectedly. Even if you are ultra-confident that your role is secure, compiling an emergency fund at least gives you peace of mind from the alternate, horrendous outcome.
Eliminate Your Debt
After your emergency fund is cemented, attempt to pay off as much debt as possible. When finances are in a precarious position, your income should take care of basic living costs, something that will not be manageable if you are neglecting to pay back lenders and damaging your credit score.
Kevwe Yerifor suggests that you pay attention to the high-interest debt initially, sorting out the credit cards and student loans. Failure to comply with these deadlines will only make it take significantly longer to improve your credit once the economy rebounds.
Review Your Asset Allocation
Ensure that your current asset allocation and investments combine well with risk tolerance and retirement plans. In Kevwe Yerifor’s opinion, elderly citizens who are nearing retirement should deal in more conservative investments, safeguarding themselves from a conceivable recession impacting their retirement. Younger people, in their 20s or 30s for example, possess ample time to recover from losses and can invest through an aggressive portfolio. For them, a recession can turn into a glorious chance to rack up securities at paltry prices.
Update Your Resume
In 2008, 2.6 million Americans were removed from their job positions with the Great Recession in full force, resulting in the highest rate of unemployment in more than sixty years. College youth students are most prone to becoming unemployed, but it is imperative for the entire demographic to augment their range of job skills and consistently improve their resume layout. A stronger resume will provide an advantage when you are vying for a new position with hundreds of other candidates impacted by a recession.
Follow Your Plan
Whatever the circumstances, remain bold in the plan that you developed prior to any pending recession. Kevwe Yerifor points out that hysteria, and selling when the market has plummeted, will cause you to miss the opportunity of re-gaining those funds as the economy returns to a state of prosperity.
While recessions tend to instill paranoia early on, it is key to remember that they don’t persist too long, usually vanishing completely at the two-year mark. Stay composed, wait for the market to recover and, at all costs, don’t abandon ship from an investment strategy that will be beneficial post-recession.