What is a recession? Many of you might have come across this word but many might barely know what it means. In simple terms, a recession is a period where an economy experience two consecutive quarters of decline after a period of growth.
The recession may occur due to imbalances that build up in an economy and ultimately call for redress. Such other cases may be compared to the current pandemic which has damaged the corporate profits and caused job losses. Borrowing from Margaret Thatcher, “the unexpected happens. You had better prepare for it”.
In preparation, here are five ways to prepare for a potential recession
1. Find Easy Methods to Cut off your Overhead Costs.
The current generation is well updated on the latest technology. Therefore, items such as the internet and good phones or computers have in one or another contributed to a lot of spending.
For instance, if you pay Ksh.5,000.00 on your phone bills may consider using the phone purely on cash generating activities; avoid goods of flamboyance, dress, alcohol, hotel food, unnecessary travel. At home, buying your groceries in bulk and if you are living by yourself you think of getting a roommate, this will help you save more on utility and grocery bills.
When stock prices fall everyone gets into a panic mode, it will seem unreasonable to keep investing. You need to remind yourself that the market is unpredictable.
Increase your investment portfolio and do so in small consistent bits. Give. To make things easier for you, you might opt to go for autopiloting your investment. This will give you a chance to succeed when market recovery happens.
3.Pay Down your High-Interest Debt
There are times when you find yourself stuck with a huge debt and chances are, you tend to wait until you have enough to payback.
The probability of paying back is very minimal since your debts keep on pilling up. You, therefore, should consider paying your debts on time this will help you stay above waters until things settle down.
4.Top Up your Emergency Fund
If you are worried about the economy, one of the best decisions you can make is to have a saving account that would last you 3 to 6 months of your living expenses.
The reason for this is to help you in the event an emergency occurs, you do not wish to find yourself with no money to cater to your needs. This is the perfect getaway from accruing debts.
5.Protect your Family
In case you have a family that relies on your current earnings, you may need to ensure that your family is under an insurance policy either disability or life insurance cover. Remember the air travel warning, “for those travelling with their children, fasten your own life jacket before attempting to help others”.
There might be some concerns when dealing with both disability and life insurance especially when you are employed, such as the insurance cover not being good enough or the chance of losing your insurance when you are unemployed.
As a solution, you may opt to pick on individual life insurance. The time life policy will help you save a lot since life can be quite unpredictable.
The Steps to Preparing for a Potential Recession
Whether a recession happens or not being financially stable is something you ought to practice.
The matter at hand is how you choose to go about it. Follow the tips above and you will find your way to having a strong financial background no matter how the economy is going.
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