IMF came out a few weeks ago saying that we are in the midst of the worst global recession since World War II. Banks are failing, we have massive layoffs, governments are spending trillions of dollars and nothing seems to be working. Here are some idea’s to get through the recession, although it seems like things have improved from a month ago I still sense some fear, everyone I speak to is worried about their jobs and future, so here are something’s you can do to give yourself some peace of mind (or keep in mind for next recession because it will come).
1. Understand Recession
For some it may feel like it is the end of the world and everything is falling apart they forget that it’s a cycle, understanding recession will give you some peace of mind and will take away the unknown factor. Recession is a normal part of a business cycle, every few years we go through it and come back out.
2. Reduce Your Debt
If you have any consumer loans try to get rid of it to ensure you are still solvent. Do not get fooled by the low interest rates, it’s a trap. If you have credit cards you can call your institution to reduce your rates or transfer them to a new card with low rates, than pay it off as fast as you can.
3. Build Up Your Emergency Fund
We talked about emergency fund previously, if you do not have one than establish one. If you already have an emergency fund ensure that it is enough and add some more to it, this will give you at least some psychological support.
4. Cut Costs
Reduce your spending. Often you can reduce your bills if you call your service providers and ask for it. It may not always work but it is worth a try, in 2001 I was able to cut my cable bill by a huge amount and get extra’s permanently.
5. Balance Your Portfolio
The recession has probably bruised your portfolio so make sure you look at your asset allocation and rebalance it to get the right mix. Do not be afraid of stocks if you have a long term view, recessions are the best time to purchase good long term investments.
6. Do More At Work
If you are worried about your employment make sure you work harder than you have in the past, make yourself useful to your company. Learn new skills and attend extra courses, the more you know the more valuable you will be to your employer.
7. Diversify Your Income
Diversifying your income can act as a buffer during a recession, if you haven’t already started this process a recession maybe a good time to think about it. It’s basically having different income streams so in case you lose your job there is some income.
8. Continue With Your Investment Plan
If you are saving for long term goals continue to do so, this is a good time to buy stocks at low prices. Recession is a bad time to change your investment strategy, if you are a buy-and-hold investor continue to do so.
What did you do to get through this recession? Any other tips?
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