For most people, an economic recession often means leaner times. Corporations start to lay off employees. Inflation makes everyday goods cost much more than they used to, and values of assets and investments plummet from market uncertainty. It doesn’t have to be this way though. You can actually improve your financial situation during a recession so you come out better on the other end.
A recession doesn’t mean all economic activity ceases. Instead, this activity shifts around to different industries. By making smart, proactive moves you can actually position yourself to profit while others are struggling to pay their bills. I’ve created this post to share my personal tips with you that you can use to make more money during a recession.
When a recession is approaching, most people begin to panic. Inflation is common during these times, so prices on necessities like groceries will rapidly increase. This alone is enough to make someone’s budget experience problems. However, recessions and depressions are like a cascading lines of dominoes. Once one piece falls, there is nothing to stop gravity from topping more pieces one after the next.
Asset prices like stocks and sometimes even home values plummet. This makes it difficult for the average person to tap into their savings when they’re tied up in investments since they will usually have to sell for a loss during a poor economy. The same thing happens with large corporations too. Many of them invest in other companies, sometimes with loans. All it takes is for one of these companies to collapse to cause major financial issues for others.
Once other companies begin to feel the pressure, layoffs begin. This then causes money problems to cascade into the population even more. It’s common to feel helpless during hard times, but you don’t just have to sit back and wait for things to improve. There are actually numerous steps you can take to protect yourself and even to flourish financial during an economic recession.
Tighten Your Budget
As soon as you realize something is going wrong with the economy, the best thing you can do is tighten your frivolous spending in your budget. Start to accumulate as much cash as you can in an emergency savings fund. This is your backup in case you get fired and need a reliable source of income until you find work again.
A lot of recessions will come right after a period of financial prosperity, so it’s actually easy to miss this change and continue to spend as though the good times will last forever. Try to pay attention to the media, co-workers, and even prices of items in stores. One of these areas will often give you some kind of advance warning that this is going to happen, so you can have proper time to prepare your money situation.
Examine your monthly spending to figure out exactly where your cash is going. There are likely a few areas where you’re wasting money, and probably a few more areas where you could make some sacrifices to reduce your expenses. The sooner you can make these changes to your budget, the better off you’ll be in the long run.
When stock markets begin to plummet, it can make you quite nervous when you have a lot of money invested. In general, you should never invest money that you cannot afford to lose. You also shouldn’t depend on the money from your investments, especially not at the level they’re at during a bull market. When you base your income on bull market income, you’re guaranteed to run into problems when a bear market hits.
If your overall financial situation is still good and you have extra cash each money, market downturns are actually the best time to buy new stocks. However, make sure you’re not buying with cash that you may need in the next few months. You could potentially wait 6-18 months for a market recovery that will allow you to cash out new investments at a decent profit. Being forced to sell before then can actually be worse than never investing at all.
Try your best not to give into panic and sell your assets when the prices drop. Hold on to your stocks, cryptocurrencies and other securities. The prices will go back up eventually. Trying to sell and buy back in at a lower price can often lead to disaster and/or missed profits, so just keep calm and maintain your positions. When possible, DCA your investment prices lower during this time by buying more. When you can average your cost lower, all of your investments will reach a break even point at much lower prices or deliver large profits when prices return to their previous highs.
Start a Side Hustle
One of the best recommendations that I can give you for handling a recession is to avoid depending on your job to pay your bills. Companies can lay you off during bad economic times without any warning, so if all of your eggs are in that basket then you’re just waiting for disaster to strike. Instead, be proactive and take steps to provide for yourself no matter what your boss decides to do in the future.
Almost anyone can start a side hustle to make extra cash. Over time, these can even be built into full-time incomes that could allow you to quit your 9 to 5 job. During recessions, a supplemental income from your own business can be a life saver. It’s also a major stress reducer when you don’t have to worry about keeping your bills paid or even whether you’ll get laid off tomorrow.
I have an entire section of this website devoted to teaching you how to create your own online business. You can learn about specific side hustles that complete beginners can do to start making money this week, but I also provide more in-depth strategies for more experienced internet marketers. Take a look at my side hustles here.