5 Easy Ways to Prepare for the Next Recession
Whether you like it or not, a bear market is coming. There’s nothing to fear, this cycle is inevitable. With some preparation, your portfolio should tough through it. But what if we hit a recession? Remember the Great Recession of 2008? Many were unprepared for a huge change. Luckily, most of us have learned from the tragic market crash. With the knowledge and experience, many investors are now preparing for the next recession, despite not knowing when that will be.
We know the thought of another recession is scary, but do you know what’s worse? Being unprepared. Whether it’s a bear market or recession on the way, give these contingency planning tips a try.
1. Assess your portfolio quarterly
Review your portfolio quarterly with a financial consultant. This is important no matter the market state. Why? Because you’ll ensure your portfolio and finances align with your goals, lifestyle, and needs. Practicing this in preparation for a bear market or recession can help ensure it is allocated properly to avoid extreme loss. This can also put your mind at ease.
2. Decrease debt
Eliminate as much debt as possible to ease your financial burden in a recession. The less you owe, the more for your pocket. Start with high-interest debt such as credit cards. Ideally, you should maintain a low or zero balance for your credit cards at the end of each month. Remember how many lost their jobs during the last recession? Decreasing your debt can protect your finances because you’ll have less obligation and a larger budget—even if you get laid off.
3. Build an emergency fund
Emergency funds are your cushion for tough times. Save as if you’ll need it but spend it as if it doesn’t exist. This means saving as much as possible and not dipping into the funds unless it’s a true emergency. This is especially important for families or business owners as you’ll have more financial obligations.
4. Reduce Expenses Now
Now is the time to act. Find ways to reduce your expenses. Try purging a few subscriptions or shopping at discount stores—a few small changes can go a long way. If possible, try reducing one or two large expenses, such as your car payment or cell phone bill. You’ll thank yourself whether you’re affected by a recession or not.
5. Meet with a Financial Professional
A financial consultant can transform your finances to achieve your short-term and long-term goals. This person should understand the related laws to protect your portfolio while ensuring you’re making the most out of your situation. The professional can also prepare you for a bear market or recession with tips tailored to your finances.