Hearing the word recession creates a feeling of discomfort for many. After all, recessions come with a lot of negatives, like stock market declines, job losses, and more. But you can learn how to prepare for a recession and still thrive financially. The situation could be different if you’re getting ready to retire. In that case, it may make sense to revisit your risk level because significant losses near the beginning of your retirement years can be problematic.
That means they go through periods of expansion and growth, as well as periods of decline known as recessions. Or, more severely, depressions such as the Great Depression in the 1930s. The U.S. economy officially entered a two-month recession in February 2020 after more than 10 years of economic expansion. Just so we’re clear, a recession means the gross domestic product (GDP) has been down for two quarters in a row. But it’s not officially a recession until the National Bureau of Economic Research says it is—and they haven’t yet.
Prioritize paying off high-interest debt
Canada is likely headed into a recession in the first half of 2023. As unsettling as that may sound, recessions are a normal part of the economic cycle and serve to ease factors such as high inflation and elevated housing prices and rents. If you’re smart with your money, increase your value, save where you can, and eliminate unnecessary spending, you’ll be able to survive and potentially even thrive through a recession. During a recession, there’s a higher likelihood of losing your job. If you own a business, you may find that fewer clients renew their contracts or fewer shoppers buy your products. This can tighten your personal finances and make bills difficult to pay.
- There will come a time when fears of a recession will pass, and economic growth and prosperity are on the horizon.
- Most recessions aren’t as serious as the one in 2008 was, nor are they as light as the one in 2020 was; they usually last for just under a year.
- You can also find a good side hustle to earn some fast cash in the meantime.
- In addition to this, continue to make money as usual by not quitting your day job, if possible.
- Job vacancies exceeded one million in the second quarter—a new record in Canada.
While no one can definitively say if or when a recession will happen, doing what you can to prepare for a potential downturn is a smart idea. “Of course, you want to focus on getting through the recession, and some will be able to do that more easily than others,” said certified financial https://forex-review.net/ planner Paul Deer, vice president at Personal Capital. “But across the board, you want to have a plan in place and stick to it.” If you don’t have a so-called “rainy day” fund now, you may want to reassess your budget to see if you can save more money each monthOpens in a new window.
Our Guide to the Best Humidifiers in Canada in 2023 (And Where to Get Them)
Adding significant monthly obligations like a hefty car payment may make things difficult if a recession affects your finances. Although it may be tempting to stop investing, continuing to invest during a recession could https://forex-reviews.org/ be a smart move. If markets eventually move higher, buying during hard times can add to your long-term returns. And remember, no matter how scared you might feel if you lose your job, don’t take on more debt.
What To Expect In A Recession: How To Prep Your Finances To Weather The Storm
When she bought a new build, she thought she’d avoided all the unexpected costs that come with fixing up an old home. She learned the hard way that new builds also come with their own set of expenses and doesn’t want to make the same mistake twice. “When times are tough, and money is tight, it’s best to free up as much cash flow as possible,” Douglas says.
Reassess your budget every month
It’s a good time to invest, especially in stocks and potentially real estate. You will bulk up your emergency fund and not rely on a second income in the event of a job loss. Living below your means is the best way to prepare for the unexpected. One of the savviest financial moves you can make to prepare for a recession is to shift to living on one income and saving the other. Getting frugal with your budget and reducing expenses can free up a lot of money to save for a rainy day fund. Passive real estate investing like REITs (Real Estate Investment Trusts), royalties, and selling digital products like eBooks can all be sources of passive income that can help you in tough times.
How can you make money in a recession?
That’s something you can accomplish with a zero-based budget, which promotes intentional spending. When you plan your spending carefully, every dollar https://forexbroker-listing.com/ of income goes toward a specific expense. For example, you anticipate spending for categories such as housing, food, loan payments, and utilities.
Recessions aren’t all bad
When she’s not thinking about money, Lisa co-hosts a long-running weekly podcast, Pop Fashion, and is an avid baseball fan. You may not be able to fully protect yourself from the impact of a recession. But bolstering your finances when you have the money to do so can soften the blow when a downturn develops.