We are currently in one of the longest economic recoveries ever recorded. That is excellent news, but on the flip side, we are due for a recession. Who knows when that will happen, but there are steps to take to prepare yourself and possibly take advantage of any future downturns:
Don’t Live on the Edge: Before making a major purchase or change in your life, calculate the costs and risks of your actions. For example, before you assume that you will purchase a fixer upper, make massive improvements, then resell it for a large profit, you should calculate different scenarios. Instead of just looking at the best case scenario, calculate a likely outcome and then also a worse case scenario. If you won’t be able to handle the worse case scenario, then may be you should pass up the opportunity. Don’t take my word for it, but try to remember what happened during the last recession.
Build Up Cash: Sometimes cash makes people anxious as they feel that it is just sitting there practically earning nothing ,and they are missing out on appreciation from the stock market or some other investment. Be patient and know that if your income gets cut in half or you lose your job and collect the paltry amount of unemployment benefits, then you will have a cushion. On a positive note, when there are downturns in the economy it tends to present itself with opportunities to purchase real estate at a discount, buy a business, or to invest in the stock market at depressed prices, which all increase your returns.
Pay Down Debts: The lower your debts, the lower your risk, and the more cash flow you have available. You’d be surprised by how much less income you need to live if you eliminated some debts.
Line of Credit: If you don’t have a large cash cushion or don’t see one in the near future, then a line of credit can be a good second option. The caveat though is to make sure that you use it wisely and don’t overspend just because you know that you have access to funds.
Market Your Business and Yourself: Employees should be prepared by having their resumes updated and keeping in contact with their network. Business owners should continue to market their business for two reasons: First, if they increase profits then they will be able to weather the downturn better both before and during. Second, many businesses reduce marketing when there is a downturn, but if you increase marketing then you will stick out and increase your chances of prospering during the downturn.
All of these tips can help you to survive a recession, and they can also be applied even if there isn’t a recession. Don’t be afraid.