Recent events have many wondering if another recession is in the offing. Ben Bernanke recently indicated that the forecast for the U.S. economy has worsened (and indicated that more stimulus could be coming), there are concerns about what’s coming in terms of the U.S. deficit, and there are worries that between the U.S. and euro zone sovereign debt problems a global economic slowdown is inevitable.
- Improve your income diversity: Many of us rely only on source of income. This can cause problems if your income source becomes a victim of a recessive economy. Before recession hits, it’s a good idea to work on ways of diversifying your income so that if you do run into problems with your primary source of revenue, you have a back up to help ease matters.
- Prepare to invest while you can get good bargains: If possible, now is a good time to arrange your finances so that you can invest while prices are low. During a recession, you can often find lower prices on stocks, and on some other investments. Freeing up some capital so that you can take advantage of these opportunities can be a way to turn a potential problem into a benefit.
- Build your emergency fund: If you think that a recession is on the way, and you are concerned about what that could mean, you might pad your emergency fund a little bit. That way, you have a build up to help you if you lose your job, your hours are cut, or your dividend payouts are reduced. An emergency fund can help your peace of mind, and shore up your finances.
- Pay down debt: You want to reduce your obligations prior to times of economic difficulty. That way, if disaster strikes, you have fewer obligations, and you don’t have to worry about missing payments and suffering a lower credit score.
- Think about what expenses you can cut: Finally, you should also give thought to which expenses you could cut out in order to save money. Reduce your expenses, and a reduction in income won’t be as difficult to deal with, should it come during a recession.
In truth, the above items are good practice even if no recession is coming. These are strategies that can help you build a better financial position, no matter what is happening with the economy. These tips can help you build wealth and create a more stable personal economy. Even if recession doesn’t come in the next few months, a recession is inevitable at some point in the future. Making the effort to recession-proof your finances now can pay off down the road – whether a recession actually materializes or not.