As the world continues to battle the infectious and deadly coronavirus, many people are asking:
Is a recession foreseeable in 2020?
Are we already experiencing it?
With companies closing down and millions of workers left with no choice but to file unemployment, some experts believe that we may be at the beginning stage of an upcoming recession.
If you’re worried about your financial state, this article is for you.
Here are some tips to thrive and survive if a pandemic-induced recession is going to hit us this year. You can also find out how prepared you are for a recession by taking our recession proof quiz.
1. Start Tracking Your Expenses
For people who have prepared and have enough funds to last them without their regular paychecks — life goes on. But for most of us who haven’t saved enough for this unexpected crisis — things are probably going to get worse.
In order to save as much money as possible, consider tracking your spending now.
Not reviewing your expenses can lead to unnecessary waste of money and resources. Even if you still have your regular paycheck, you can’t risk it by being careless.
Categorize your spending and take 10mins each week to review them. Be conscious of where you might have overspent and where you budgeted well. Adjust accordingly.
The exercise seems simple but you might be surprised at what you might learn.
2. Budget Your Money
Budgeting is all about prioritizing your money for essentials. It helps you see how much money you can actually spend after you’ve set aside money for your bills.
Budgeting is always hard for people who don’t earn enough for their monthly expenses or for those that exceed it because of poor lifestyle choices.
If you don’t have this habit before, the best thing you can do for yourself now is to begin practicing.
To help you have a more stress-free budgeting experience, start by controlling the “big three” expenses in your household: housing, transportation, and food.
There are many ways you can cut costs to these major expenses. You can opt to rent a smaller and cheaper apartment, you can also telecommute instead of going to the office five times a week, and lastly you can save so much on your food budget by opting to cook instead of eating out.
3. Eliminate Bad Debt
Examples of bad debt include unpaid parking tickets, high-interest credit card debt, and delinquent bills. These debts are very costly and can derail your financial goals.
Create breathing room for yourself. Aggressively and single-mindedly work to eliminate these debts!
One of the most dangerous kinds of debt is credit card debt. High credit card debt can spiral out of control if ignored for a long time.
Another example of bad debt is debt for vacation expenses or new clothes. These activities can turn into expensive and addicting habits that can ruin your finances.
How smart are you financially and do you have the necessary financial IQ to ride out this coming recession? Take our free quiz here to find out.
4. Diversify Your Income
You might have heard this from me before; “The biggest risk you will hold in life is to have only one source of income”. Regardless of how safe your full-time jobs may seem, from a different perspective, it can also be a big gamble.
Layoffs are unpredictable and nobody ever sees it coming. Companies can file for bankruptcy overnight due to an economic crisis. We never know when these things will actually happen.
In order to survive market crashes and thrive during financial downturns, you need to diversify your income.
This could mean starting a passive income stream, taking up freelance jobs, or a side business while having a full-time job. It can also mean continuing to educate yourself and build up more skills to broaden the services you can offer.
You always get the best return when you invest in yourself.
5. Develop a Risk Management Plan
In an ideal world, you will still have a job, your clients will keep spending money, and your business will still have consumers despite the pandemic panic. However, as things are unfolding now, everyone’s finances are affected if not in jeopardy.
No matter how well your business is doing right now, there’s no assurance that it will continue during the recessions. We’ve seen how fast the virus has put halt on industries such as airlines, hotels, and cruise lines; That’s why it’s very important to have a risk management plan.
Ultimately, businesses who have prepared for recession will successfully survive. The Businesses that have obsessively planned and prepared for times like these are the ones that will rise up victorious amongst their competitors.
Is your business prepared for the recession? Take our recession-proof quiz today!
6. Save Enough Money For A Year
How much cash do you currently have in the bank? How much money in a year do you think you need to live comfortably?
If you wish to thrive in a recession, you will need at least one year of financial runway to keep you and your businesses afloat. It’s easy to take money for granted, when you have a stable job or business. But what do you do if money runs out? How will you thrive during an economic market crash?
People make bad financial decisions when their hands are forced. You might not notice it now but when unexpected situations hit you (like this covid-19 pandemic) and you know that you have a runway to fall back on, it acts as a shield for you and keeps you at peace.
7. Focusing on Long-Term Investments
During a recession, it might be tempting to simply hold on your finances and not invest. That is the mentality of the average investor.
However, there are opportunities in crisis.
If you had implemented the steps that I have mentioned earlier, you would have understood that what you are going through is simply a natural economic cycle. You have already anticipated this and you are prepared.
There shouldn't be a change in your investment philosophy. You will still be investing.
Recessions is one instance where great opportunities often arise.
When asset prices fall hard, that’s why the best investors have their eyes wide open.
The Bottom Line
By being vigilant, smart, and careful about how you handle your finances today, you can put yourself in a better position tomorrow.
The current coronavirus pandemic is just proof of how difficult it is to predict an economic downturn.
How prepared are you for an upcoming recession? Take our recession-proof quiz today to find out how well you can thrive during challenging times.
How smart are you financially and do you have the necessary financial IQ to ride out this coming recession? Take our free quiz here to find out.
