Are we headed for a recession? It surely feels like it with high gas prices, negative GDP growth, skyrocketing demand for limited resources, shrinkflation, and pandemic-fueled delays on products and services. But, there are things you can do to protect yourself in a recession.
Typically, it means higher prices and a scarcity of some goods. It could also mean that the stock market drops and inflation rises. Demand for luxury products and travel can fall. So, how can you prepare for a recession? Here are eight tips that can help safeguard you and your family, should a recession come in 2022 and beyond.
Learn to Economize
You can begin by making some changes to your daily habits to reduce your spending. By creating a budget and sticking to it, you can cut back on unnecessary spending like that daily Starbucks fix or going out to eat. It is better to save money so that you can use it to buy the things you need not just the things you want. It is also wise to have cash on hand, should banks restrict the amount of money you can pull out or if there is a dip in the investment market.
Fetch Pro-Tip: Check out our articles on how to save money at Starbucks and better budget your money.
Prepare Investments for a Recession
Now is the time to review your investments and make potential changes, before a formal recession appears. Perhaps there are certain stocks you want to sell now in case their value drops in the coming year.
A financial advisor can help you make wise decisions with investments to protect yourself from danger. Be sure to diversify your assets so that you don’t have all of your eggs in one basket. This is one of the savviest ways to protect against recession, so that if there is a dip in the stock or real estate markets, for example, you will have investments elsewhere to balance it out.
You don’t want to liquidate your portfolio, though. It’s a nest egg that will ebb and flow with the times, and cashing out when it has a lower value is not smart.
Take Advantage of Loyalty Programs and Cash-Back Offers
Many retailers have loyalty programs that offer discounts to members. You’ll find these with grocery stores, hotel chains, and big-box stores like Wal-Mart, Amazon, and Target. Take advantage of these, because, over the course of a year, the savings can really add up.
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Prepare Your Business and Plan Ahead
If resources become difficult to source, it might be wise to stock up on things you need now. If you own a restaurant, it could be a good time to buy certain ingredients or materials now should there be a shortage later. Have a contingency plan should you not be able to operate normally in a recession, and with a little advance planning, you can avoid difficulties later.
Stock up on things that are non-perishable or that have a long shelf life.
Make Energy-Efficient Improvements to Your Home
Not only are there potential tax savings in revising your home’s energy use, but it could also save money in the long run. Consider using more energy-efficient light bulbs, switching to solar power, lowering water use (perhaps using the lawn sprinkler more sparingly), and finding ways to avoid overusing the thermostat. If resources become more limited, having a home that relies on less of them can be a smart way to prepare your home for a recession. These home updates cost money upfront, but will pay for themselves over time, especially if a recession hits.
Fetch Pro-Tip: Read our article on home improvement tips to get more ideas on how to save.
Pay Off Debt, at Least in Part
If you suddenly have a loss of income, it may become difficult to pay off any outstanding debt. Develop a plan to determine which debt you must prioritize (the one with the highest interest rate) so that you don’t end up overspending on unnecessary interest. If you can pay off as much of your debt as you can now, that’s even better since a recession generally won’t forgive any debt. It will only make it harder for you to pay off. Avoid carrying debt on a credit card, and be sure to pay off mortgage and car payments on time and in full to avoid losing them.
Don’t forget about the growing demand for paying bills in increments. According to PayPal, a growing number of consumers are using “buy now, pay later” services, especially on travel services. This can help cover the cost of big-ticket purchases like airfare. PayPal’s “Pay in 4” service has seen a jump of over 325% from last year. The option to use rewards points to pay off some bills is another alternative that is seeing growing demand.
Fetch Pro-Tip: Check out our article on how to get out of credit card debt.
Review Community Aid Programs
In the event of a recession, you can turn to government and community aid programs to provide assistance. This can come in the form of food, clothes, debt relief, financial planning resources, and even help with finding employment. Now is the time to look for what programs are available before any potential recession hits. By then, you may be frustrated, and resources will go quickly. It pays to be prepared in advance in the event you need assistance.
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