Recession is coming. The cold winds of an economic downturn could arrive next week, or it could take several years. But eventually, you’ll feel its sting.
Recessions are inevitable, which is not good news at all. But those who prepare for tough times can actually take advantage of them when they arrive.
Here are some of the ways you can survive and even thrive during an economic recession – but only if you prepare now.
1. Save money to buy stocks when they are cheap
The research is clear: trying to time the market is a foolish task.
Study after study shows that investors tend to panic and bail out stocks at the wrong time. As a result, the average investor’s rate of return is usually worse than the market rate itself, according to research firm Dalbar.
History shows that investors would do much better if they simply bought a wide range of stocks – for example through an index mutual fund – and held those investments for a long time, sometimes rebalancing their asset allocation.
But anyone who felt the pain of the epic market crash of 2008 – or even the rapid crash of 2020 – knows how difficult a buy-and-hold strategy can be. So, here’s a little trick that might make the bear market easier… well, bear in mind.
Start building a cash cushion today so you can invest that amount – either a lump sum or by averaging your cost in dollars – once the market drops a certain degree, such as 10% or 20%.
Are you guaranteed to get killed with this strategy? no. In fact, you can invest money only to see the market drop further. But history suggests that the deeper the market goes down, the ultimately higher it will rise when the market recovery begins.
2. Credit support so you can get a loan
During a recession, lenders tighten portfolio, and access to credit becomes difficult. At times like these, you will need a great credit score if you are hoping to get a loan.
Building a great credit score doesn’t happen overnight. So, don’t wait for the economy to head south to improve your credit standing. Get started now to make sure your balance is in good shape.
For tips on increasing your credit, check out “What’s the Fastest Way to Increase My Credit Score?”
3. Save up front so you can grab a bargain house
In many markets, home prices are skyrocketing. But a recession could change that.
It could be a mistake to delay buying a home in the hope that eventually prices will drop—and you’ll stumble on a deal. As with the stock market, housing market timing rarely works out.
But “rarely” does not mean “never”.
If you guess correctly – or if you simply plan to buy and take advantage of the right timing – you may be able to buy a home at a bargain price when other potential buyers face tough economic times and decide to stay on the sidelines.
After all, having fewer buyers means sellers are likely to become more interested in selling to you at a discount.
Save cash now so you can get a big down payment and be ready to pounce when tough times arrive and sweet home deals pop up.
A large down payment will not only help you secure the terms of the least expensive mortgage, but will also reduce the amount you need to borrow – a double way to save.
4. Plan to get a big expense now and save it for later
Unfortunately, economic stagnation leaves few people untouched. Businesses that were once thriving can suddenly become in dire need of new sales and revenue.
This is also true for your neighborhood contractor. If you’re planning — and saving for — a big home renovation project now, you could save big money by hiring contractors who are willing to work for less when times get tough.
This tip also applies to other big ticket purchases. For example, car dealerships may be more willing to negotiate when sales are slow, and resorts may lower prices just to keep customers flowing — and income.
5. Prepare for a career change
Do you hate your profession? Even if you do, you may feel compelled to stay in your current job if the salary is great and the job is stable.
However, a dream never hurts. So, start thinking of something else you’d like to do. Educate yourself about new career paths until you find something that sounds right to you.
If a new job requires an education, get all your ducks in a row — look into local programs or online to save money — and be prepared to head back to class if the economy falters and you find yourself on the wrong end of layoffs.
During economic recession, fewer firms will be hired. But instead of trying to fight this wave, you’ll be in a position to ride it by going back to school and training for a new career. With any luck, you’ll walk out of school freshly trained and ready to take off completely as the economy heats up again.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click on links in our Stories.