How to survive a recession

Recession a period of time where many businesses goes bankrupt, unemployment goes up, some people are unable to pay back their debt and lose their home and possessions. Historical data since 1929, shows the average duration of recession last for about 9-10 months. For those who have adequate savings and little or no liabilities or debt, should be fine and can withstand the storm. In fact it be great for those who have excess money to create wealth through assets at a cheap price. But for those with little savings, living pay cheque to pay cheque and with huge debt and liability can be very stressful and devastating. Here I have compile some tips to survive a recession and how to prepare for one.

1. Refinance:

Take advantage and make use of the the lower interest rate during recession by refinance your mortgage or loan. To read up more on tip how to manage your finances and budget, please click here…

2. Pay off debt, downsize & budget:

Try to pay off your debt, loans and credit card as the interest rate will eat on your savings, especially if you lose your job. If you are unable to, consider refinancing your debt with lower interest rate. However,, ensure the refinancing will not compromise having adequate emergency fund.

One of the biggest expense is rent or mortgages. If necessary, consider downsizing your home or temporarily stay at your family members home to significantly avoid a massive hit to your finances.

Go through all your bills and subscriptions, and cancel any unnecessary ones. Be very disciplined with budgeting, avoiding non-essential purchase and look for essential goods at discounted price (usually through bulk buying). It is also a perfect time to live a more minimalist lifestyle. This is great for mental well being and just a happier life.

3. Start saving immediately:

After receiving your pay cheque and paying off your monthly bills and rent, prioritise allocating a substantial and fixed amount of cash into your emergency fund. If you can be very frugal at the start, you will have enough emergency fund to last through the downturn.

4. Resell unnecessary possession:

Adapting for a more minimalist lifestyle whilst making extra cash by selling your junk. It’s a win-win situation.

5. Work and business:

Try to keep your job even if there is a pay cut or less working hour. Tips on how to be on the good book at work is having self awareness. Those who have lack of self awareness tends to be the first to go. Also being a person who can make your team and boss less stress and more positive is valuable attribute to have.

Consider having additional stream of income, especially if your income has been cut. Here are some ideas: renting spare room, resell business, side real estate agent, virtual assistant or freelance jobs such as transcription or baby sitting.

If you have been laid off, consider relocating where there are job opportunities. At the same time, you can rent your home via airbnb or real estate to for additional stream of income.

It is important to be quick at learning new skills and adapt to changes in the market demand. Look into the latest job post and see if there are any types of jobs that is in high demand and pivot towards that direction. Consider doing short courses or apply for the entry level role in high demand jobs.

6. Psychology and mental self care:

Studies from Imperial College London and Oxford University found that there is a link between 2008 economic crisis with the 260,000 excess death among 35 states. It comes to show that our mental well being also correlates to our physical health. It is very important not to neglect our mental well being, especially in times of economic crisis.

Ensure you are in a good mental space by being prepared, have someone to support you, meditate, eat health and exercise (increase feel good chemical in your body), There are plenty of self help strategy out there that may suits you best, so have a look out there. Think positive, be patient and know that these crisis will soon past and the economy will recover again. Most important look after your mental well being and health.

How to prepare for the next recession:

Recession can occur any moment, but here are tips on how to prepare for a recession.

1. Save up for emergency cash fund:

Save up for an emergency cash fund. Ensure you have enough money to survive on for 9-12 months. This includes cost of rent, bills, grocery and general living cost. Knowing you have this fund will significantly reduce your level of stress and anxiety.

2. Have liquidity:

During recession, cash is king for most people. Consider having some of your assets where you can withdraw money within a week or so if you need it. Having this flexibility can cover your emergency funds or to purchase any investment assets at a bargain price. Greatest wealth are made is during recessions time where assets are extremely cheap and will appreciate in value when the economy recovers.

3. Pay off debt and have no liabilities:

Make sure you are debt free. Interest rate from debt can compound and significantly impact your finances. However, make sure you have significant amount of emergency fund first to ensure survival. Emergency fund should also cover your mortgage for a reasonable time frame.

4. Work towards a recession proof career:

This advice may not be for everyone, but if having a stable job is the most important thing to you, than consider working towards a recession proof jobs. However, if passion is a determinant factor in deciding your career path, I suggest try progressing into a more senior role and be the best employee you can. Senior staff and the top performing employee are less likely to be laid off. Alternatively, just ensure you can enough saving and emergency fund to enjoy your recession holiday 😉

5. Consider starting a business during a recession:

Starting a business during a recession is probably the best time to start one. There will be more potential customers due to less competition as many business under go bankruptcy. The overhead cost such as office and factories space will be cheaper. If you are committed and dedicated to the business, it is easily to make significant growth.

Remember that recession is a natural cycle of a cyclical economy. Be reassured that the chance of you surviving a recession is extremely likely. Just be financially responsible and live within your means.