10 tips on how to survive and thrive in a recession

In the last episode we covered the inverted yield curve, which is a sign of a pending recession. In this Money Tips episode, I want to cover surviving and even thriving during a recession, as sooner or later, one always comes.

1. Prepare for a recession because one always comes sooner or later. Economies of the world will always have their ups and downs. The Sun doesn’t shine all the time. There is night and day, summer and winter and boom and bust. By adequately preparing, for instance by cutting costs you cannot only survive a recession but even thrive during the recession.

1. Save and create an emergency fund. This is pretty obvious, but it is surprising how many people have no savings whatsoever let alone a contingency fund for lean times. Most people not only spend what they earn but spend more than earn. They act like the good times will never end, but nothing stays the same forever. You should ideally have an emergency fund in the bank which would be equivalent to 6 months’ worth of household bills. If you are self-employed or a small business owner, make that 12 months.

1. Pay off and cut out consumer debt. Being debt free is liberating and that should be your aim. I’m not talking about dates that you would use to buy a property or your main home. That’s good debt. Bad debt is consumer debt buying stuff you probably don’t need and could easily live without. As Warren Buffett said, buying consumer goods on credit cards at 16% interest rate per annum is dumb. This is why he owns credit card companies.

1. Create additional or multiple income streams. In the recession, people lose their jobs and businesses. It’s always useful to have a second string to your bow so think about ways that you could earn an additional amount per month. For instance, a side line business, such as Amazon trading or property deal packaging, which require little upfront investment. Alternatively, consider a part-time job. This will also help you save money and prepare for Ailene period.

1. Check on your investments and think about diversifying if you are heavily into equities or shares. Obtain independent financial advice, especially on the money is in your pension fund, which are probably invested in equities. The stock market has been on a 10 year bull run which cannot last.

1. Talk to your family or friends. Share the burden and explain to everyone that you may have to tighten your belt for a while until you get through this challenging time. This will help you reduce stress and anxiety.

1. Reduce expenses to live within your means. This might sound obvious, but I would suggest that you do this before you it’s a recession. Examples include, cutting on discretionary spending for things that you don’t need, even if they are 50% off in the sale! Cutting back on subscriptions for that gym you hardly ever visit or cable TV you don’t get much time to watch. Reviewing your mortgage is another useful way of reducing your outgoings now so that you can save for the future. Food is a major expenditure and there is always savings that can be made while still eating healthily.

1. Be that indispensable employee so that money still is keeps coming in. There is never a good time to slack off at work or coast along, but during a recession this could be fatal. You want to be the type of employee that would be the last person they want to let go.

1. Keep saving money as part of your budget. Get into the habit of saving however much money you have coming in and keep this lifetime habit that will see you through good times and bad. Remember, that during a recession there are bargains to be snapped up in the stock market and property market. If learn how to become a stock market a property investor and do your research now you’ll be well placed to thrive during a downturn.

1. Avoid recession depression and try to enjoy life. It’s easy to become down and depressed and think that the world is coming to an end during a recession, but the truth is they never last that long and things will eventually get better. Accept the challenge and try to enjoy life even if times seem bad.

In my book, I talk about the wealthy who know how to preserve their ‘economy’ or what I call the ‘Uconomy’ and protect themselves whatever the outside economy is doing. They usually follow the ‘3 R’s of Money Management’, outlined in Part 3 on ‘How to Grow and Manage Your Money’. As I’ve said in previous podcasts, making money and keeping money are two different skills.

Read about money mindset in my book, Yes, Money Can Buy You Happiness, on Amazon - http://bit.ly/2MoneyBook