How To Prepare For A Recession

There is a possibility that we could see a recession at some point in the future. It might come this year, or it might come in five years. No one knows when the next recession will hit, but it will eventually cause havoc for many households. Now is the time to prepare because those who take proactive steps will be better positioned to ride out the next economic storm successfully.

Pay off Debt
The first step that people should take to deal with a recession proactively is paying off debt. People with little or no debt are usually better able to meet their monthly obligations because less of their income is going toward paying off their debts. Getting rid of all debt, but a mortgage is one of the best ways to build wealth, and it’s also one of the best ways to prepare for a recession.

Save up an Emergency Fund
Another important move that people should take to prepare for a recession is setting up an emergency fund. Most personal finance experts recommend that families save up between three and six months of expenses as an emergency fund. During recessions, many people lose their jobs. Having a cushion available in the case, this happens can help a household make it through a few months while a breadwinner looks for a new job. Having some money available is always better than having no money on hand for emergencies.

Work Hard
Providing value to an employer is a great way to avoid a major round of layoffs. Working hard and building profits for a company can show up in annual performance reviews. While hours and bonuses might get cut, it’s possible for the best producers to keep their jobs.

Buy Stocks
In addition to having a fully-funded emergency fund, it’s a good idea to keep some cash on hand in the event a recession hits. Recessions usually cause the stock market to drop quickly. This will frequently provide a great buying opportunity for those who have cash available. Having cash available during a recession to buy stocks can be a provide a great opportunity to build wealth for the long run.

Recessions are periodic drops in the GDP of the US or the world. Those who are prepared will likely come through a recession in much better shape than those who failed to prepare. Recessions can provide a great buying opportunity for those who are able to maintain an adequate level of income. In fact, a recession can be an important period for building real wealth for those who are prepared to take action.

Originally posted on RagingBull.info.