Are You Prepared For The Next Recession?By
Akhila Masapogu, 23-Mar-2020
The tension of the next recession is starting to take off even before we are fully recovered from the 2009 recession’s bad experiences. The coronavirus which is causing the whole world to tremble right now is also preparing the way for the next recession very soon.
According to an article issued by Bloomberg, the chances for the recession in the USA in the next 12 months have risen by 53% after the financial market meltdown caused due to the Coronavirus spread out.
Coronavirus spread out across the globe is taking a heavy toll on businesses, tourism sectors, and economical trading directly impacting the employment status of many individuals. Persistence of the same situations of a slightly prolonged period can lead to a significant flip in the largest economies impacting all countries.
The Financial market’s vulnerability due to the critical conditions all over the world coinciding with the Saudi-Russia price war and the fear of further spreading of the pandemic are some causes that are collectively contributing to the next recession.
The last time the recession hit the world in 2009 people were quite unprepared and it perhaps caused damage to everyone in some or the other way. Millions of people lost their homes, jobs and wealth. This time with so much havoc already happening the occurrence of recession might cause more devastating experiences.
Recession is quite unpredictable and can occur anytime, hence it’s a requisite for everyone to be prepared and stay out of trouble. Prevention of its occurrence is anyhow impossible but here’s what you can do to be at least prepared for the next recession.
Review Your Investment Portfolio
Invest in reliable sources that are capable of generating good passive income or attractive returns. Consider diversifying your investment portfolio investing in different streams such as bonds, stocks, dividends, etc. This will decrease the risk and also you can enjoy the benefits of different vehicles at the same time. During emergencies, even if one investment doesn’t perform as you expected you will have another backup investment to provide income that is required for your survival. Passive income from these investment vehicles will also serve as a stable income source.
Consider Investing in Real Estate
Real Estate is a unique asset class that can take you a long way during the recession. One benefit of investing in Real Estate is that your investment will be backed by a physical asset that can be sold, leased or even renovated by the investor even if the investment doesn’t perform well. Rental properties are considered one of the most stable income sources for passive income. Real estate investments produce capital appreciation, along with rental income. Hence investing in real estate will help one to have a solid backup of an asset, also passive income will add up to your emergency fund.
Start Building a Solid Emergency Corpus Fund
Liquid cash is a lifesaver during emergencies. During economic constraints, a shortage of liquidity of cash is a major concern as the cash in circulation decreases. Hence building an emergency fund will help in times of shortage. Having cash that is enough for living at least for 3-6 months at least will spare you enough time to survive in case of unexpected unemployment. So start building an emergency fund out of your savings from now itself. Having the emergency fund will also save you from stressing and overburdening during times of recession.
Startup with a Side Hustle
Having to depend completely on one job can be expensive during the recession. Also, in general, having a side hustle will not only help in achieving financial stability but you can reach your goals efficiently. Even if you lose one job you’ll have another source to back you up until you find the next one. The income from the side hustle of yours can also be used in saving the emergency fund which we discussed above. Both ways the extra job that you take up will make you financially stable so that you may not have to worry too much.
Concentrate on improving your skills
Millions of people during the last recession have become homeless because of unemployment. The sad part is that one of the lower-level employees gets affected by this as the company tries to reduce costs by firing off the employees. Businesses during these times due to the low demand and high production costs sack off the employees to reduce costs. This leaves millions of people jobless. Hence concentrate on improving the skills that will lead you to a higher position so that you may not become unemployed. Learn new technologies, add new qualifications to your resume and keep yourself updated with new skills.
Recession is unpredictable and inevitable, this means how much ever anyone tries to avoid it is not possible. At least being prepared for it will reduce the intensity of the loss. Reducing unnecessary expenses along with the above-mentioned tips will at least help to be prepared for it.
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