Preparing for a Recession

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Preparing for a Recession

It seems like the sky is falling every week

The stock market plummets then the next week it hits a new high. The Economist’s who say we are heading into a recession become quiet and the people who said that the recession is nowhere near, get louder. Following that, the market goes back down and those same Economist’s who predicted doom and gloom are back on television again jockeying to say they told us that this would happen so they can land their next book deal.

Here is the deal

Nobody knows when it is going to happen, but I can confidently tell you it will happen eventually. Think of the things that happen in your life that negatively impact it that happen on a whim. I am telling you that the recession will come EVENTUALLY. The good thing about this is you can prepare for it. As a financial leader in your home, you can mitigate how the downturn can hurt your family. You can also mentally prepare for the things that you will do in the event things get bad.

Quite honestly, if you are the financial leader of your family, you should always have a plan for your family in any event.

Create a budget

Create a budget man. I am serious. I literally could tell you my number right now. What is your number? What is it?  Do you need to bring $3,000/month into your home? Is it $5,000/month? If you spend all the money that comes into a checking account, you don’t have a budget. It’s like growing up in tornado country. You know eventually a tornado is going to hit your town. When the tornado comes, you have a place where you and your family can hunker in a corner and wait it out. That is what a recession is to your budget. You need to look at the entire family in the eye and let them know that they are staying within this amount of money until it is over or until you say so.

Pay off debt

The reason debt is so bad is because the payments show up at the most inconvenient times, man. You are trying to entertain people in your home and you are having a great time relaxing. All of a sudden the phone rings and you tell your friends “A BILL COLLECTOR IS CALLING!” Next thing you know, your friends don’t want to open up the next bottle of wine. As a matter of fact, they even offer to go out and get you some stuff.  In all seriousness, when a recession comes, it pays to be debt-free. It is really hard to cut expenses when you owe people money.  So, if you believe the recession is coming soon, then you really need to take a look at what debts you have and start paying them off.

Create savings

Create Savings now. I am not a big fan of having 3 to 6 months in your bank account, but it is better than not having 3 to 6 months of savings. Once you know what your number is, then it is easy to know how much money you need to save. Plus this gives you one hell of a cushion so that you know if you take a job that pays you a little less, how long your savings will last. The average recession lasts 22 months so you need to make some moves to make this last.

Cut expenses

What expenses are you cutting and when? You have to know if Netflix is on its way out. You need to talk to your spouse about what bills will get cut if any. If your kids are going to private school, then you have to pull them out and let the city educate your kids with the money you pay in your taxes. Don’t be afraid to let Justin from Paseo Robles be your premier wine. It’s $20.00 and it can stand on its own. Are you dropping that BMW back off at the dealership and buying yourself something that will get you to and from work?  As a matter of fact, how is that transit system and would it be cheaper to take that instead?

Everything should be on the table and you need to know what you would do in the event of a recession

Assess your Career Field

Seriously, is there a chance you may get laid off or your contract not get renewed? Have there been pay reductions in the past?  Are you one of the new hires so you are the easiest to get rid of?  Sorry, Susan, we haven’t really bonded with you yet so it is easier to fire you than fire Bob who we have known for 20 years. Really take a look at this. Maybe you should update your resume or consider making a career change. You can also take the time to take some classes to help with your transition to a new career a little easier. This is also a good time to consider starting your own business.

I know you think a recession is the wrong time to take a leap of faith, but actually, it’s the right time to start if you are prepared for it.

Once you have done this, then you don’t need to panic when the next recession hits. You want your family to know that you are all hunkering down a bit but you are not stressed. You don’t want your family to see you sweat. There may be some changes that you need to make for the family but that is so you are in a better place in the future. It will create an atmosphere where your family can grow as individuals and as one family unit.  If you are interested in learning more, please subscribe to my blog.

Photo by Michael Longmire on Unsplash