With multiple layoffs from the Big Tech companies, high interest rates and inflation, all signs lead to a recession. A recession is a decline in economic activities quarter or quarter for more than two consecutive quarters characterized by high unemployment and decrease in consumer and business spending.
Here are some ways we can be recession proof:
- Save, save and save some more: Build up your emergency funds, increase how much you want to have saved up should anything happen. For example, if you had 3 months worth of expenses, you might want to consider increasing this to 6 months. If you are looking to buy a house in the next year or two, this would be a good time to save for your downpayment as interest rates on savings accounts are somewhat favourable.
- Spend Way Below Your Means: High interest rates means the cost of living above your means (read: debt) just got way more expensive. This is the time to spend way below your means, if you can afford to. Review your budget and or your expenses and cut back on things you might not need at this time.
- Pay off high interest debt as soon as possible: Increasing interest rates means the high interest on your credit cards or other high interest debt will only keep getting higher. Pay those off as soon as possible. If you have a line of credit, you might want to consider transferring the debt on your credit card to a line of credit with a lower interest rate.
- Increase Your Credit Score: Better credit helps you get access to credit facilities at lower interest rates. This would be a good time to increase your credit score and ensure you have good credit should you need a new a credit facility. For example, if you are trying to buy a house next year when the prices might go down, a good credit score might improve your chances at getting a favourable interest rate.
- Don’t Panic: This isn’t a good time to liquidate your investments that haven’t done well over the year. If you absolutely don’t have to, don’t sell your stocks or any investments you have made in the stock market, especially if you believe in the company.
- Improve your skillset: This would be a good time to brush up on those skills that you’ve been holding off on that could make you a more attractive candidate should you be in the job pool. Youtube has a lot of free resources that can teach you on certain softwares and there’s also free open learning programs some universities offer.
- Have multiple sources of income: This could be by getting a part time job, investing in an asset that generates passive income, monetizing your side hustle, etc. Check out this post for side hustle ideas.
- Make yourself invaluable at work: A few months ago, people were talking about quiet quitting in the workforce and just doing the bare minimum at work. This is not the time to continue that trend especially with the layoffs happening. Make sure your employers can feel and see the value you bring to the team and if the work environment isn’t conducive enough or you hate your job, you probably want to start networking and looking for a new job that will allow you bring your best self.
- Assess Your Risk Tolerance: The markets are very volatile at the moment. If your investments aren’t allowing you sleep well at night, you might want to reconsider your risk position. If a 20% decrease in your assets doesn’t give you peace of mind, try out more stable investments with lower return rates (GICs, money market, HISA).
- Adjust your Investment Portfolio: You might feel more comfortable holding onto cash and bonds as opposed to stocks or cryptocurrencies at this time. If you feel more comfortable and have a lower risk tolerance, you might want to consider adjusting your investment portfolio.
- Diversify your investments: The easiest way I would say you should do this is by investing in index funds and/or ETFs as they typically have a bunch of companies they are already invested in across different industries. If you can, invest in stocks across different industries. Don’t just invest in stocks, if you have the appetite, consider investing in bonds, REITS, real estate, small businesses, minerals etc. Oh, and maybe buy GOLD!
That’s it for me. What are some things you are doing to ensure you are recession proof?