Recessions pack quite a punch, forcing you to expect to pay more for everything and earn less. According to the Guardian, a recession might be right around the corner for the UK. You might be feeling some of the effects already – like having to pay through your nose for groceries.
Don’t panic – recessions aren’t forever! While challenging, they won’t affect you too badly if you buckle up and prepare your finances for the hit. In fact, if you’re careful and strategic, you could use this downturn to your advantage to shore up your financial position. Below, Otto gives you some expert guidance on how to survive and, indeed, thrive during a recession:
Downgrade your lifestyle a notch
Arguably, the most effective way to weather a recession is to cut back on non-essential expenses. Essentially, live within or below your means while the recession lasts. It won’t be enjoyable but it will keep you afloat until things get back to normal. Some suggestions are eating out less, buying second-hand, purchasing groceries in bulk, and opting out of subscriptions. Avoid large purchases.
Create a recession budget
Creating a recession budget can help you stay in control of your money. A good budget will point out bad purchase habits, allow you to save for emergencies, help you pay down high-interest debt, and stop you from overspending. You can use a budgeting app to conveniently create a budget on your smartphone or PC. CNBC suggests some top budgeting apps that are worth a look.
Go for recession-proof investments
Run-of-the-mill investments are not always viable during a recession. Experts recommend three recession-proof investments: pound-cost average investing (for trading), buying dividends, and investing in consumer staples. Diversifying your investment portfolio can also help you mitigate the risk. When in doubt about where to invest, always consult with an experienced financial advisor.
Bolster your emergency fund
Your emergency fund could be your lifeline during a recession if you lose your job. As such, while you still have a job, consider putting extra money every payday into your emergency fund. That way, you will have a larger safety net. Note that it’s always best practice to have an emergency fund in cash.
Consider your employees’ financial health
If you own a business, you may have to take measures to support your employees’ financial health. A severe crisis will affect their morale and productivity, which will have a cascading effect on your business. You can leverage financial wellness platforms and programs to help your employees help themselves. Releasing educational material on finances can help too, as can putting them in touch with a financial expert.
Look for ways to make more money
It’s always a good idea to have more than one source of income. If something were to affect one source, you could fall back on the other. There are various ways to make more money. In addition to having a job, you could freelance in your spare time, get a second job, sell something, offer services, and more.
Consider launching a business to make money
Starting a business during a recession is not as bad as it sounds – some of the most successful companies in the world launched during a recession. You can expect to pay less for everything from office rent to employee salaries. You could bootstrap a minimum viable product (and company), and carefully build things up.
Furthermore, some industries don’t do badly (or even thrive) during a recession. Some examples of profitable industries that are always in demand include repair services, accounting, and security. You will always have clients if you pick one of these profitable niches.
Actively bust your stress and anxiety
Stress, anxiety, and worry are your biggest enemies during a downturn. If you’re mentally strong and positive, you’ll have an easier time tackling any recession-related crisis. As such, take care of yourself and proactively bust stress and anxiety. Some suggestions are exercising, going out in nature, picking up a hobby, and reading inspiring success stories.
Conclusion
A recession will affect your financial health, and possibly push your long-term financial plan off course. For the best results, create a recession budget, reduce your expenses, and look for ways to make more money – like starting a recession-proof business. You can reach out to a financial expert for personalised tips and suggestions on how to thrive during a recession.
