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Don’t go into an economic downturn unprepared.
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Many financial experts warn of a coming recession, or period of prolonged economic downturn that is characterized by slow growth and high rates of unemployment. You don’t want to go into a recession without being prepared for it, so there are five steps you should start taking right away so you’ll be ready in case your job or finances are affected.
1. Save more money for emergencies
Whether you already have an emergency fund or not, it may be time to put some extra cash away for a rainy day because recessions tend to increase the chances of that day coming.
You don’t want to be left unable to pay your bills if the recession affects your job, nor do you want to have to borrow, because lenders often tighten credit standards during a recession. Interest rates may also be higher as the Federal Reserve has been raising rates.
Traditionally, the advice was to have three to six months of living expenses in emergency savings. Many financial experts, including Suze Orman, now suggest putting even more into a high-yield savings account. Heeding this advice is smart in case a recession does occur.
2. Start improving your skills
A recession typically means unemployment rates surge as companies let people go due to slow growth and reduced demand. You want to make sure you’re indispensable to your employer to reduce the chances your job will be at risk. And you’ll also want to make sure you have a solid resume in case you need to look for a job during a difficult time in the economy.
So start working on improving your employability now. If your company offers training, take it. Otherwise, look into other options for developing your professional talents.
3. Get serious about networking
You don’t want to wait until you’ve lost your job to try to start building a professional network. Make connections now before you need them — and even see if you can help people out if you’re employed and others are looking for work.
You can build a solid network both online and through in-person professional groups. And if you happen to find your job is eliminated, you’ll have plenty of people to turn to who can help you find a new position quickly.
4. Pay off debt to reduce your monthly bills
If you can reduce the amount of money you owe, you won’t have as many large monthly payments to worry about. This can make surviving a recession easier even if your income has been reduced.
READ MORE: How to Pay Off Debt
5. Check out your asset allocation
Finally, you’ll want to take a close look at your investments. It’s a bad idea to stop investing during a recession or to sell assets at a loss just because they’ve started to go down due to the current economic conditions. Recoveries usually follow market downturns, and it’s best to stay the course.
However, you don’t want to be exposed to too much risk given your age and investing timeline. So make sure you have the right mix of assets given how soon you’ll need your money. Anything you will need in around two to five years should likely be in savings rather than invested.
By taking these five simple steps, you can make sure you’re ready if a recession comes.
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