Talk of another recession has been going on for years now, but it’s hard to deny that 2023 and 2024 are increasingly looking like they may be recession years. Major corporations are laying off staff, the stock market is crashing, interest rates are rising, and if spending starts to slow then a recession may be imminent.
Now recessions are a completely normal part of the cyclical economy in the US, but they can be scary if you aren’t prepared. And if you are prepared, they may even be beneficial. Here are five things you should know to help you prepare for a potential incoming recession.
1. Manage Your Income Streams
Naturally, losing your job is everyone's biggest fear when faced with an imminent recession. This is especially scary if you only have one source of income since you could lose all of your earnings in one fell swoop.
That’s why you should always have multiple income streams. Having a side hustle or two will act as insulation if you do ever lose your job during a recession. Even if you start off small, finding an outlet that nets you an extra 50 dollars a month will still be helpful in the long run. You can build up your revenue streams over the long term until they become a substantial part of your earnings.
2. Reduce Your Monthly Expenses
You don’t want to be in a situation where recession strikes, you lose some or all of your income, and your expenses are still high. During times like this when a recession is looking like a distinct possibility, you should take it as an opportunity to look over your spending and reduce it as much as you reasonably can.
This means going through your budget line by line and marking both the large and small areas where you can cut and save.
3. Set A Goal For Your Savings Rate
This is a goal you should be working toward with or without an impending recession. Start by saving an extra one percent of your income, and work toward the goal of slowly building up your savings rate until you are putting away 50% or more of your earnings. Not only will it leave you with more savings that will protect you from the worst effects of the recession, but it will help you reach financial independence more quickly.
4. Research Unemployment Benefits
In the situation that you do lose your job during a recession, it’s vital to know what unemployment benefits are available to you. Losing your job during uncertain times can be deeply stressful, so doing your due diligence early will take some of the burden off your shoulders, as well as help to reduce stress since you already know what your options are.
5. Take Advantage Of Your Job Opportunities
A lot of jobs provide lessons, courses, and certifications that employees simply aren’t aware of. While you’ve still got job security you should be looking into ANY learning opportunities that you can get through your current workplace. Not only will it improve performance at your current job but it will make you more marketable if you lose it.
As a general rule, take advantage of any professional development, job training, or upskilling that you can. If your job doesn't provide these kinds of opportunities, you can still take steps to find those opportunities outside of the workplace. Recession or no recession, you are your greatest asset and you should do what you can to invest in yourself.
6. Don’t Let Fear Hold You Back
It’s easy to let fear get the better of you in the face of a possible recession, especially when it seems like everyone is talking about it all of the time. This kind of fear can stop you from striving toward your goals - it can make you fearful of investing in the stock market and real estate, or make you less inclined to retire early.
Most of all, don’t let the fear of recession stop you from seeing the potential benefits. It can be an opportunity to improve your situation in all the ways discussed above. Whether you are creating side hustles, improving your resume, or hiking up your savings rate, these are all things that will benefit your situation with or without a recession.
While there are indicators that recession may be coming soon, that’s still no guarantee that it will. It’s hard to say for certain, which is why you should be prepared for the worst (while hoping for the best!).