Sunday, July 29, 2018

Are You Ready for the Next Recession?

There are a lot of websites that are predicting a coming recession.  Apparently it isn't "if" but "when" the economy will tank again (economics are cyclical so that makes sense).  I'll add to this summary of how you should be prepared for the inevitable financial shake up:

  1. Savings.  Of course everyone should have savings.  An emergency fund should be the minimum that you have so that you can cover three to six (even better, nine to 12) months of living expenses.  During the last economic downturn, people were out of work for a year or more so being able to pay bills out of savings is way better than maxing out your credit cards--at maximum interest rates--just to survive.
  2. Investments.  Dave Ramsey always recommends mutual funds which makes sense; this way if one stock tanks, others may not do so poorly.  Also when the recession turns around, your entire fund will probably come back up as it did after the last economic downturn.  On the other hand, investing a lot of money in one stock or day trading or trying to "time the market" usually has very poor outcomes.
  3. Debt.  Pay of your debt ASAP!!!  This includes the house and the car and the student loans and the credit cards.  Listen to Dave Ramsey until your ears bleed if necessary but pay off everything.  In the event of a bad recession, if you have no debt, you will be able to survive much longer on your emergency fund than if you have a mountain of bills to pay each month.
  4. Be employable.  I would also say learn how to hustle and also have multiple streams of income as this is the best way to float through turbulent economic times.  If you put all of your (employment) eggs in one basket and that industry tanks, you will be in deep trouble.

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