How to Prepare for the Next Recession

Financial planning isn’t just about savings, investments, and watching your assets grow. The best plans ensure that you have adequate provisions in place, should the worst happen. In short, you need a recession-proof plan…

The following is a simple 5-point plan to ensure that when (note, not ‘if’) the next recession hits, you’ll be able to—perhaps not overly prosper—but, at the very least, be able to ride the storm and come out the other side in good financial health 

5 Key Strategies for Recession Preparation 

• Recession preparation #1: Reduce your debts
• Recession preparation #2: Continue with investments
• Recession preparation #3: Keep some cash
• Recession preparation #4: Invest in yourself
• Recession preparation #5: Have a side income stream

Recession preparation #1: Reduce your debts 

Most of us have debt—with a mortgage likely to represent the largest amount—but it’s important to remember that the level of debt should always be manageable. This should be true even in times of recession.

OK, easier said than done, we hear you cry. Debt is, for most of us, a necessary evil. But when a recession hits, being unable to meet payment requirements represents the biggest financial risk. Therefore, reducing your debts as much as possible should be your number one aim. Credit cards, student debt, car finance, and more—paying them off as soon as you can should be your highest priority.

Recession preparation #2: Continue with investments 

During a recession, it’s human nature to become a little nervous to continue with investment commitments. But continue you should—especially if you’re still working. Paying into your 401(k) and other retirement planning is essential, don’t even consider cashing in. The recession will, eventually, subside and the economy will move back into a more favorable position. Your commitment to long-term planning should continue in a normal vein if it’s at all possible.

Recession preparation #3: Keep some cash 

By this, we don’t mean a stack of dollar bills under the mattress. Instead, we’re talking about a cash-ready emergency fund that you can access instantly, should you need it. 

Having such a cash account quietly earning a little interest means that you have liquid funds to tap into when needed. If you don’t have any such savings, then do everything you can to start to build some. Sell anything you don’t need (eBay and other websites are the perfect outlets for turning unwanted items into cash), cancel that unused gym membership and save the monthly subscription instead, invest in a home coffee machine and save on your Starbucks fix each day… You get the drift.

Recession preparation #4: Invest in yourself

Take courses, gain qualifications, go back to school… Do whatever it takes to increase your employment opportunities and value. As well as increasing the likelihood of earning a higher wage, you’ll also be more in demand should you face redundancy during a recession.

Recession preparation #5: Have a side income stream 

Set up a little side hustle that earns you a steady income stream. This could be anything in your area of expertise or simply a hobby that you expand. Sure, it might only bring in minimal dollars per month at first but, with a little effort, this will likely increase. Should the worst happen, and you lose your main income, your little hustle might end up being the lifeline that keeps you above water—or even become a whole new career opportunity.

Don’t Leave Your Financial Future to Chance: Partner with Capital to put Safeguards in Place

Ensuring a solid financial foundation should be at the forefront of everyone’s planning. While it is, of course, possible to do this on your own, most of us aren’t financial experts. That’s where partnering with a trusted source, such as Capita, can provide the vital direction that will mean you aren’t negatively affected when the next recession hits.

Remember, the economy will inevitably go through peaks and troughs. Having a wide varied investment portfolio and a long-term plan will ensure that you and your family are well-provided for, no matter what the future may bring. 

Head over to https://www.capitafinancialnetwork.com/services/tax-planning for more information and get in touch with a Capita expert today.