Basic Financial Fitness: How to Survive a Recession
There's been a lot of talk in the financial world, for months now, about whether a "Great Recession" will happen or not. There's no way to know for absolutely sure and experts are divided, but it begs a question: Are you ready for a great recession?
Before we dive into that, let's answer another question: What is a recession? Simply put, a recession is when an economy takes a nosedive. This in turn drives down prices for goods, people lose their jobs increasing unemployment, inflation & interest rates go down, and the stock market loses value. If you remember how financially scary things were when the housing market destroyed the American economy from 2007-2009 then you should know that that was a textbook great recession. With the onset of the global pandemic last year, we've seen all these things going into play, which leaves the door open for a new great recession to take place.
So, how can you prepare for one? The first thing you should do is NOT wait to prepare - start now. Here's what you should be doing (if you aren't already):
1. Pay off any bad debt you have ASAP. Obviously, this doesn't apply to mortgages, but if you have credit card debt, doctor's bills, or anything else of the like, get it paid off. If you can't pay it off, pay it down as aggressively as is feasible.
2. Start that emergency fund. Start putting away as much money as you can. You should have no less than three months' worth of bill money saved up.
3. Start stockpiling shelf-stable food items. Buy cheap canned vegetables, canned fruits, instant mashed potatoes, pantry staples like flour, sugar, coffee, candy, and even some booze.
4. Start stockpiling household goods and supplies. Keep plenty of shampoos, conditioners, body soap, toothpaste, laundry soap, feminine supplies, deodorant, and anything else you can think of. Dollar Tree sells all this stuff pretty cheap, so it's easy to stock up on the cheap stuff. It will get you by.
5. Have a few games and books around. It gives you something to do, keeps your mind off things, and prevents you from spending money going out to do things. Throw a game and potluck night with your friends once a week.
6. Don't spend money on unnecessary things. If you're looking at a big-ticket item, hold off for now. Only spend money on the aforementioned things. After that, only what's necessary.
Will we have a great recession? I don't know, but you don't want to be stuck between a rock and a hard place. If you start preparing yourself now, you can be ready if a recession takes place. And if a recession doesn't happen, well, then you can breathe easy and still be in a better position than you were before. There's sure nothing wrong with that.