No matter what your financial status is, an economic slowdown or a recession is always a bad time to deal with. It can cause a huge strain on not only your finances but also your future plans. Therefore, it is always better to be prepared if and when there is another economic slowdown. So, we have prepared this list of 10 tips that will help you prepare for a recession or next economic slowdown. Continue reading…
prepare for a recession
Even though economic expansion makes people optimistic and hopeful about the future, there is sure to be an economic slowdown in the economic cycle of any country. Needless to say, it is quite unpredictable as well. Since it is impossible to when the economy will plunge into an economic slowdown, it is important to be prepared for the next economic slowdown at all times. While usually, an economic slowdown is preceded by market crashes and falling investor confidence, there can be times when a major event triggers an economic slowdown without any warning. So, it is better to start preparing as soon as you can, while the economy is restarting after coronavirus pandemic. Rest assured, we have got you covered.
[toc]Here are the 9 tips to help you prepare for a recession or the next economic slowdown.
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Build a strong emergency fund
If you’re worried about a volatile economy, one of the best things you can do is make sure you have 3 to 6 months of living expenses in savings Ideally in a long term fixed deposit. The reason it’s important to have this extra money on hand is that in the event of an emergency, you don’t want to realize you don’t have enough money to pay for food, medications or your rent. You don’t want to be in a position where you have to go into debt to get by, and setting money aside for an emergency is the perfect antidote.
Make debt repayment your priority
Paying down your high-interest debt is critical because it takes the pressure off of your cash flows if you run into financial trouble. Not having a massive credit card bill every month will help you stay above water until things settle down. If you don’t pay down your debt and are only able to make the minimum payments on your credit cards, your balances can quickly balloon. Imagine getting laid off at work and seeing your debt grow before your eyes. That’s exactly what you want to prevent by taking care of it now.
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Keep your additional income handy
If you truly are worried about tough economic times ahead, then you need to do everything you can to insulate yourself. One of the best ways you can do that is by increasing your earnings in anticipation. There is a huge freelance market available today that can quickly be transformed into a good source of side income. This can come handy during an economic slowdown. But make sure that you do not overlook your most important asset: your current job.
Create a moderate investment portfolio
A balanced investment portfolio that works on the concept of diversification and hedging can withstand almost any economic storm. Always remember that economic slowdown is a part of the economic cycle and just because the economy is heading towards one, you should not deter from your long-term financial goals. By creating a balanced portfolio, your money will continue to work towards achieving those goals while you battle with the difficult economic conditions.
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Ensure that you maintain a good credit score
It can seem silly to worry about your credit score when you are worried about the economy tanking. But what happens if you are ready to buy your first home in the midst of the recession? It might actually be the perfect time to buy if prices begin to drop, but getting a loan during a recession is more complicated. During these recessions, lenders only lend to the strongest borrowers. This means that if you don’t have stellar credit, you might be out of luck. The same goes if you are ready to refinance your student loans when rates are low.
Ensure that all family members have a Health Insurance cover
When you are planning your budget always set aside health premiums for every family member in UAE and in your home country also. Never ever try to cut costs by saving money by not paying for health insurance, it can be a costly affair in the future.
Avoid postponing your medical bills
As human beings, we often tend to procrastinate and put things off for later. However, keep in mind that if an economic slowdown hits the country, you will wish that you had cleared your medical expenses beforehand as during the economic slowdown, your income can get affected and the prices of medical treatments can rise. So, get your expensive medical treatments done while the economy is booming.
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Maintain strong networking to maintain contacts in multiple places
Networking is the most important step towards becoming more prepared. First, ping your own family and friends for contacts they may have in industries that interest you. Second, join professional networks; virtually all industries have clubs and societies that host networking events. Third, consider professional development opportunities through in-person or online educational programs. In other words, having a large network now would pay off in the future when you need it the most.
Create a budget for difficult economic conditions
Once the economy goes into an economic slowdown and you start feeling the pressure, creating a budget can be difficult and frustrating. Hence, when the times are good, create a budget that you will be able to follow during an economic slowdown. Make a list of expenses that can be avoided or reduced to bring down the overall cost of living. If you have a budget created beforehand, you will be much calmer during an economic slowdown.
Whether you are worried about a recession or not, the good news is that these nine tips will help you build a solid financial foundation regardless of how the economy is doing. So, make sure that you start following these tips today itself. You will be glad you did!
