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How to Prepare for a Recession

By WealthHack  Posted on March 16, 2020 In Blog, Investing Tagged budget, Debt, Emergency Fund, How to Prepare for a Recession, income, investing, line of credit, market crash, Network, recession Leave a comment 

What is a recession?

A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

1. Build up your 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 a savings account.

Wherever you keep your emergency fund — in a savings account with a brick-and-mortar bank, an online savings account or even a money market account — the most important thing is to keep the fund liquid. You don’t want to be forced to pull money out of the stock market during a recession.

2. Pay down debt

Paying down your Debt especially High-Interest Debt gives you peace of mind in the event of Job Loss.

3. Reduce your living expenses

Reducing your living expenses free up your cash flow to pay your debt and to save for Emergency Funds.

4. Boost Your Credit Score

Boosting your credit score allows you to access cash and take advantage of low rates.

5. Diversify your income

Consider starting a side hustle to bring in extra income. Build and Grow your Passive income such as Stock Dividends, Interest Income, and Online Business. Having an extra income can add peace of mind.

6. Upgrade your career

You should look to build up and update your resumes. Keeping in touch with friends and colleagues in similar industries is another way to stay connected to potential employment opportunities. There will always be a demand for highly-skilled, qualified employees. Keeping your resume sharp and colleagues close may lessen the time in finding a new position should yours be cut.

7. Plan to profit from a market crash.

Reserve Cash to profit from the market crash. Stocks prices are usually cheaper. I like to buy Blue chip Stocks with Dividend Growth. Central Banks usually lower the rates during the Market crash allowing you to gain access to cheaper loans.

8. Keep Investing

A recession can be the best possible time to begin investing because asset prices often fall hard, meaning you can pick up stocks, bonds, mutual funds, real estate, private businesses, and more for far less than you could just a few years prior.

9. Protect your portfolio

One of the cornerstones of modern portfolio theory (MPT) is diversification. In a market downturn, MPT disciples believe a well-diversified portfolio will outperform a concentrated one. Investors create deeper and more broadly diversified portfolios by owning a large number of investments in more than one asset class, thus reducing unsystematic risk. Investing in dividend-paying stocks is probably the least known way to protect your portfolio.

10. Get a Line of Credit

Line of Credit can give you a ‘cushion’ in case of financial crunch

11. Freshen up that network

Don’t stop networking. You should always be trying to make new professional connections.

Conclusion

Whether you are worried about a recession or not, the good news is that these 11 tips will help you build a solid financial foundation regardless of how the economy is doing.

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