Are You Ready For The Next Recession? It has been 10 years since the end of the Great Recession. For many, the Great Recession is merely an unpleasant memory given how well the financial markets recovered. However, current financial conditions are now generating recessionary concerns. No one can accurately predict when the next recession will occur. To reduce the risk of experiencing a significant financial setback, try implementing one or more of the following precautionary measures.
Don’t Panic
A recession is not the end of the world. It is an economic slowdown lasting for at least 6 months in a row. Regardless of how well-prepared you are to weather the downtown, you will come out on the other side of it. It is smart to have some financial cushion to ride out the economy’s volatility and lessen the impact on your lifestyle, investments, and savings.
Build Up Your Cash
Recessions cause instability in jobs, raises, and investment portfolios. One of the best ways to protect yourself from the effects of a recession is to have a fully loaded emergency fund. It should cover your living expenses for at least 6 months. Having a liquid, cash-based, emergency fund will prevent you from needing to sell investments at a reduced value.
An emergency fund is generally considered your most important type of savings. While no one wants to reduce investment savings, briefly redirecting a portion of your investment savings towards cash can help you navigate a volatile financial period.
Reduce Your Debt
Regardless of how the economy is doing, it is always a good idea to reduce your debt. Debt is stressful and costly. During a recession, it can be challenging to cover day-to-day expenses. Debt repayment may become a low priority, resulting in fees that can quickly spiral out of control by taking these steps you can reduce your debt dramatically and improve your financial stability.
Manage Your Lifestyle
Checking in with your finances to make sure you are in the right place can help you cut back on unnecessary spending. Reducing expenses now will allow you to increase your cash savings and preemptively limit your financial obligations if economic conditions decline.
Being prepared will give you peace of mind. Smart financial practices will serve you well in any economy. Taking the time to understand your finances and making necessary adjustments will minimize the inherent risks of an economic downturn.
