It’s not a matter of “if” there will be another financial recession, it’s at matter of “when” it will happen. And as we recently just set the record for the longest stock market run up since the end of World War 2, it’s a good time to stop and reflect on whether or not you are prepared for the next difficult economy.
If you are lucky, a recession will just cause a drop in your investments, and recover a short while after. However, many people will end up losing their jobs or having their income reduced as their employer is struggling to keep pace with a loss in revenue.
Part of my personal draw to simple living is the financial security it brings. While I work to simplify my life, I’ve also reaped the benefits of consuming less and being more intentional with the way I spend my money.
By saving money and learning how to use my resources effectively through simple living in good economic times, I’ve set my family up for security through bad economic times.
5 Ways To Prepare For The Next Recession
- Budget – The most important tool in any financial toolbelt is the budget. It’s how you effectively use the money that you earn. Your budget gives you full control over your cash flow, as well as clearly shows you how much money you need to live on. If your income gets effected during the next recession, a budget will help you make informed decisions.
- Emergency Fund – You should always keep 3-6 months of expenses, or more, in cash. Your emergency fund is the cushion between you and life. If you lose a job or income during a recession, having an emergency fund will allow you to continue paying your bills while you search for new work.
- Eliminate and Avoid Debt – Becoming debt free should always be a priority for anybody who is striving for a more simple life. As you reduce your debt, you lower your monthly fixed expenses in your budget. During a recession, and during good times, having a lower cost of living by living debt free will enable you much more flexibility.
- Build Skills – Don’t become complacent with your current job and current skills. Never. Stop. Improving. Keep building your skills so that you become more valuable in the marketplace. Improving yourself enables you to do more for your current employer, as well as be positioned to find a new job should you need to.
- Have a Plan – Don’t let your finances happen to you, be intentional with a plan. If you know your priorities, you’ll be able to set yourself up for success. And whatever your plan is, it should always assume that there are going to be tough times (like a recession). Make sure that you are confident in what you are doing, so that you can stay the course when things get rough.