How to Prepare for Recession

May 14, 2008 · Filed Under Financial Literacy, recession

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We don’t know whether recession really hit the nation. It is professional economists’ job to research and analysis whether we are really in recession right now. In fact this is not really important for us. The most important thing right now is we should take action to recession-proof our finance and prepare for the recession.

Just like our body. It is more important that we protect and keep our body healthy. Once we make it, our body will hardly get sick. In most cases, prevention is the best.

So let’s take some simple steps to prevent ourselves from suffering financially during recession.

11 Steps to Prepare for Recession

For Your Personal Finance:

1. Keep and Save an Emergency Fund. Emergency fund is the most basic requirement that you must do in order to proof your finance against any financial disasters. It is recommended that you save at least 6 months of your living expenses as your emergency fund. However, if you are tight in budget, you should at least reserve 1-3 months of emergency fund for recession. The more you save, the more security you have during recession period.

2. Spend Wisely. Start a budget and spend your money wisely. Try to live below your income and not your credit. If recession really happens, you will need to tighten up your budget so that you have more money each month to pass the hard time.

3. Reduce Your Debt. I always recommend people around me to reduce their debt as much as possible especially credit card. Debt is just like a bomb and it can burst anytime and ruin your life. It is ok if you are having a job or income to support it. However, it will be a nightmare for you if you are downsizing or in the recession period. So reduce it and make it under your control.

4. Keep an Eye on Your Investments. If you are investor, you may want to put at least some of the nest egg in a safer place. Recession usually hurts stock market. Nowadays, real estate market is not really stable as it is one of the causes of recession. So maybe you should retreat your money from those 2 investments options. Bonds usually do better in recession and it might be a good choice for you.

For Your Job:

5. Pay Attention to Employment Opportunity. People worry about recession because they might lose their jobs which are the main income for them. So please start earlier and pay attention on the job market. You don’t need to panic but it doesn’t hurt to keep your eye for opportunity. You may read this article to find out what kind of job is recession proof.

6. Increase your value. Increase and show your value to your company. Maybe you can take a few courses related to your job. This is the best prevention against getting fired. Besides that, it will be your advantage too if you are looking for new job during recession.

7. Self-promotion. Maybe you dislike this. But don’t you find that people who know how to sell themselves always have more advantages than others? You must know how to sell or present your best to your boss. Others won’t see your value unless you know how to sell your ability to them.

8. Learn how to sell. I always recommend people to learn how to sell. In fact, selling is a job that always available in the market because they are the group of people who bring income for businesses. So most of the bosses are willing to spend money on this position. If you want to find out more reasons why you should learn how to sell, read my post it is very important to learn the skill of selling today.

For Your Business:

9. Reduce unwanted expenses. Just like personal finance, you have to reduce those unnecessary expenses. In fact, this is a very important step for every business owners.

10. Organized more valuable promotion. Business is affected in recession because people are not willing to spend money. However, if you able to organize some promotions that bring value to people, they are still willing to spend their money in your business.

11. Strengthen your relationship with customers. You must care about your old customers. They are the group of people who spent money in your business before. If you can build a strong relationship with them and make them become your repeated customers, they can be the basic income for your business and stabilize your business.

Recession Is Cyclical

Recession is an economic cycle. It happens again and again. It might happen again in next 5 years, 10 years or even at the time you retire. Be prepared for it so that your personal finance won’t be affected by recession. At least you must do something to protect your retirement fund which is extremely important for every one of us.

Tags: economy, recession