Are we soon going to hit another Great Recession? Recessions are sometimes planned to occur for market corrections, but on the other hand, they occur due to the domino effect leading to layoffs. Either way, the occurrence of recession or downtime in a global economy is inevitable. Speculations are the next one can be even bigger and have a longer impact than the 2020 Great Recession. Of all the things we can have, securing our finances/job is one of the top priorities on everyone’s mind. So how do we make sure to sail the storm during a crashing world economy? How do businesses stay afloat or even thrive during a recession? And how to survive the next big recession or prepare for an economic collapse? Anticipating such a crisis can make you stay ready; because the question is not if recession would re-occur; but, when? Explore the options and learn to stay well-informed before the next global recession hits badly, not only to survive but thrive during such tough times.
Is A Global Recession Almost Inevitable?
Recessions are months, if not years of negative economic performance, usually accompanying a period of above-average growth. So the question is, after the pandemic and its impacts on unemployment, is the next global recession on its way? Sooner or later, is an economic recession inevitable?
Businesses scale back or fail due to the financial recession. Companies and small businesses owners reallocate resources connected to unsuccessful projects leading to unemployment. As a result of cost-cutting, employees are repriced or in the worst case replaced with cheap alternatives especially during the transition phase.
What To Do To Survive Next Recession?
But here are eight habits to start cultivating to make your finances thrive even in the worst of times. Doing these things before or during such an economic recession can help to survive and even come out of it stronger and wealthier.
1. Calm Down, Do Not Panic
Change and uncertainty scare us. Voices exaggerating uncertainty, fear, anxiety, panic, and all sorts of negativity are not uncommon. But the first thing to learn is to stay calm and have patience for when the dust settles is when the world around starts to give signs of hope. So, do not panic or make unstrategic, uncalculated moves.
“Too much time is spent thinking of fear for the next recession,” cautions Tom Diem of Diem Wealth Management in Fort Wayne, Indiana. “Instead, think abundance. This is when you want to move up in your career, particularly in a management position. By the time fear is at its highest, you will have your resume out there and have made positive contacts with at least several new hiring managers”.
2. Start Thinking For The Long Term
What happens during a recession is that the GDP growth, revenue, and economy fall significantly causing layoffs. But what truly happens during a recession is what experts call ‘market value correction’. Hence think about what really caused the recession and what would happen in the long term.
A small tip that would always come in handy: investing in stocks for the long term. Set aside a certain amount from current income and start investing monthly, quarterly, or on a yearly basis. Such investments or savings would give changes for a comfortable life regardless of the crash in the economy.
The famous Warren Buffett says, “whatever stock you plan to hold for 10 years, don’t think about it in 10 minutes.”
Here are a few long term investments one can try out to be sure you stay ready for the recession:
A. Growth Stocks
It is a stock of a company that produces abundant and sustainable positive cash flow whose revenues we expect will increase faster than companies in their field.
A few examples of growth stocks are Amazon, Netflix, Salesforce.com.
B. Stock Funds
Also known as an equity fund. Stock funds are funds that we invest in the stock, also called equity securities.
A few examples of stock funds are utility funds, technology funds, gold funds.
C. Long Term Bonds
Long-term bonds pay a higher interest rate. However, they usually come with a term to maturity of between 10 to 30 years.
D. Mutual Funds
A mutual fund is an investment program supported by stockholders who trade in diversified holdings and manage them professionally.
4 Types Of Mutual funds
E. Real Estate
Recessions can cause deflation (falling prices) of real estate properties. Investing in the right real estate property has the potential to increase your net worth significantly. Not just apartments, but have an open mindset to seek good options including different lands and improvements, old buildings, summer houses, cabins, etc.
Real estate inventors earn money by not only selling and buying. But the real estate investors can make money by either renting their property.
A few benefits of real-estate investment are:
- Buying and renting houses, farmhouses, vacation homes.
- One can also crowdfund real estate sales and developments.
- Other benefits include passive income, Steady cash flow, tax benefits.
- Real estate stocks and real estate investment trusts (REITs) allow a way to invest in real estate without owning, operating, or financing properties.
- By buying real estate properties, we may also secure a house for ourselves. We are not aware of what the future holds. Such properties provide a sense of security for our future.
F. Tax-Sheltered Retirement Plans
A tax-sheltered annuity is an investment that allows an employee to make pre-tax contributions into a recession account from income. Since the contributions are pre-tax, the contributions and related benefits are not taxed by IRS until the employee eliminates them from the plan.
As you may have seen, all of the above-listed examples are relatable and can be trusted to secure one’s future during a recession.
The importance of long-term investment can not be over-emphasized. So, you can get one that works for you and secure your finances.
3. Set Up A Side Hustle
The need for a side hustle has never been more important than now. Having more than one means of income has become a necessity in a time where jobs are not as reliable as before.
A recent report states that 61 million adults already have a side hustle and 24% of people in America plan to start a stream of passive income in 2021. The report also states close to 50% of parents with kids under 18 years say they have a side hustle, which is twice the size of younger generations.
Regardless of the purpose, whether a hobby, extra cash, or volunteering; a side hustle if properly managed, would act as a lifeline during difficult economic times and may even help you survive a recession.
It’s not so hard to come up with a groundbreaking idea to start a side hustle. Simply lookout for what you like or some basic need around you you can solve.
If that too is complicated to figure out, you can do something as simple as:
- Tutoring or coaching
- Teaching musical instruments
- Offering consulting services
- Helping businesses or individuals in your career path
- Working as a virtual assistant
- Becoming a freelancer
- Digital photography and its services
Something to note is whatever you do, make sure to keep it simple and be consistent. It is also advisable to have a side hustle that is scaleable.
4. Increase Your Value To Your Employer
As much as this sounds like overreaching, it is an honest strategy that has proven to work all the time it has been applied. This is not to say that one begins to act pretentiously or does “eye service” but to be a valuable employee that the employer finds almost indispensable.
Here is why, most people are the first ones to lose the job, during a recession. No doubt, only essential, indispensable, efficient staffs would probably still have their jobs. So, how to reduce the odds for yourself?
There is a hierarchy by which people are fired even at workplaces. Managers are the first to be fired in times of crisis. People at a higher management position do not get a benefit of the doubt whereas, on the contrary, an ordinary employee may have the leverage. For instance, a junior associate’s mistake would not cost a major loss to the company, but being a C-level executive one may get fired immediately. Moreover, companies see managers as expensive resources who consume a lot of taxes.
Be a worker known to deliver tasks efficiently and effectively, one that can be completely trusted, one that brings such an energetic attitude to work. By doing this, when the decision about cost-cutting comes into play, an unconscious bias would exist about you helping you to retain the job.
So stay ready to weather the storm of recession and start honing your skills. It is also wise to learn about unemployment benefits at your current company and switch to another company if they provide better insurances and unemployment benefits.
5. Set Up An Emergency Funds Account
“An emergency fund or a cash reserve should be 6 to 9 months of living expenses,” said Megan Gorman, partner at Main Street Research.
The results of a survey show that about 69% of Americans have less than $1000 in their savings account. This shows that if anyone in that category has some sort of financial emergency, they would most likely be a disaster because they have no emergency funds account set up for critical times.
So, before the storms of recession hits hard, ensure you have an emergency account set up for quick access. How you choose to set this up is left to your discretion. You can do this by setting aside a percentage of your salary weekly or monthly, depending on how you get paid. You can even fund your emergency account with your side hustle.
Also, ensure the amount set apart is quite substantial such that when recession thickens, and there is nowhere to turn, you have enough to live well and comfortably.
6. Spend Smartly And Cautiously
When life is good and everything is fine, learn to spend cautiously and save for a rainy day. To achieve this goal, it is good to live within a budget. Basically, the idea is to live by your means, nothing extravagant.
This would help you track where all of your extra cash goes, and if you find that you should not be spending money on those extras, you can cut them. Instead, put the money in some other place like your emergency funds account or sponsor a side hustle if you don’t have one. This way, you can be sure to weather the storm when the recession days hit.
7. Pay Up Outstanding Debt, Especially Clear Out The Bad Debts
When life is good, servicing your debt once in a while would not be a big deal; going on vacations a few times a year could not hurt, but once recession hits and bills are piling up, jobs are being cut, then the reality of debts dawns on such person, and an overwhelming feeling rushes all over such person. So, to not be in that category, reduce the extras and service your debts.
So start finding ways to pay up what you owe if this applies to you. This is not a position to be in the dark recession days.
8. Consider A Change In Career Path
Although this is an in-recession tip, this can be helpful because jobs would indeed cut in those times, but others are recession-proof. Therefore, you might want to consider having some skill or work experience in these fields. By doing this, you can be sure to have some sort of lifeline to live comfortably during the recession.
These are some of the things you can do to survive the next recession. But before picking up any of these strategies, make sure you do your research thoroughly.
Best Recession-Proof Jobs
These recession-proof jobs do not get affected even by a collapse in the economy. They go on despite the issues we may face in the future. These industries are bound to have less impact and survive a weak economy because of the nature of their jobs being in high demand.
1. Health Care Industry
If our economy collapses tomorrow, there is no way the health care industry will be affected. A collapse in the economy has nothing to do with the health of an individual. Sickness is a part of life, and people do get sick despite a decline in the economy.
2. IT Professionals & Services
As seen during the recent pandemic, the IT sector, much like health care, most likely won’t be much affected by the collapsing economy. The use of technology in public transports, health care sectors, food production, and other areas will only grow.
Hence, IT professionals will still have their jobs as the internet is the foundation of a functioning world. We can’t live with specific IT specializations, and with the benefits of AI and development in technologies and machines, it has become a part of our daily life and our everyday needs.
3. Utility Workers Such As Waste Management Workers, Electrical Workers
Recession or not, we don’t stop our everyday basic needs. To fulfill those necessities, we require specific workers such as waste management, electrical, plumbers, etc.
Without them, we won’t be able to survive and go on about our life. They make our lives so much easier. Consider taking a job or investing in these sectors to stay on the safer side and protect damages to your personal finances.
4. Home Delivery And Courier Companies
With surging e-commerce growth, delivery and courier companies are making daily lives easier for all of us. Not to mention, customers turn to home deliveries and online shopping especially during times of crisis preventing you from being a victim of the recession market.
For example, giants like Amazon had an insane growth during the pandemic. The company saw a 60% growth in Amazon’s stock value and a market capitalization of $570 billion in just one year.
5. Grocery Store Workers
Buying groceries and products for daily use such as food, shampoos, soaps, sanitary napkins, and many more. Despite the economic decline, people won’t stop eating and going on with their daily lives, and using products from grocery stores becomes a need for us.
A Few Other Recession-Proof Jobs Are:
While no job gives a 100% guarantee to weather recession, the above-listed ones have proven to be quite secure. But stay ready by having some work experience in other career paths. You never know when you may need it to survive a recession.
To round up, as much as we don’t hope for an economic crash, it is better to stay ready and prepared, living alert for whatever comes. So, if a recession is coming, panicking and making decisions hastily without proper risk assessment would most likely lead to bad decisions. But if you apply all of the tips listed above, you can be sure to be ready and live comfortably when the recession hits.
Recession may not be avoidable, but we can surely prepare ourselves for when that time comes. Making the most out of the resources we have right now can not only benefit us but future generations as well. Together we can surely survive the recession.
Whenever we hear the term economic collapse, it instills fear and panic in all of us—a lot of why, how, when, where, what clouds our minds. But amid fear and panic, we forget about the solutions that will prepare us for economic collapse and help us survive the recession.
Preparing for an economic collapse may be the way to go for us instead of sitting and worrying about the questions we have no answers for. Here is what we can do to prepare for an economic collapse whenever it may occur. The points mentioned above will surely help us survive the recession.
Key Takeaways On How To Survive The Next Recession
- A recession refers to a brief period of economic decline. We can generally identify it by a drop in GDP (Gross Domestic Product) in two consecutive quarters.
- There are a few habits we can cultivate which will prepare us for the economic collapse.
- Do not panic: Panicking about what may or may not happen will not help the situation. Instead, sit down, take a breath and do things accordingly with a calm mind.
- Think about the long term: You can prepare yourself for the economic collapse by thinking about long-term investments. Invest in stocks, save money buy real-estate properties. Think about the future now so when the recession comes, you’re already prepared for it, mentally and financially.
- Set up a side hustle: A side hustle, if properly managed, would always be a lifeline in difficult economic times; it can be a hobby, extra cash, or volunteering.
- Increase your value to your employer: Be a valuable employee that the employer finds almost required. At the time of recession where there will be a shortage of jobs, this can come in handy for you.
- Set up an emergency funds account: Setting up an emergency funds accounts will back you up in times of extreme adversity.
- Spend cautiously: Make sure you are investing your money rather than just wasting it mindlessly and carelessly. Spend it on the things you need, not the ones you want or those which will give you temporary pleasure.
- Pay up outstanding debt: Start paying any debt you have. Instead of spending leisurely, use that money to pay off any debt you may have.
- Consider a change in career path: Reconsider having some skill or work experience in a recession-proof job.
- Recession-proof jobs: Jobs in a few sectors will remain unfazed even by a collapse in the economy.
Can We Survive A Recession?
Prevention is better than cure. So instead of sitting and preparing for the economy to collapse, we can use this time by taking cautious steps and saving money and resources for whenever the recession may occur.
How To Prepare For An Economic Collapse?
We can prepare for an economic collapse by following the steps mentioned above in the article.
How Long Does A Recession Last?
The recession may last up to three to five years, depending upon the decline in GDP.