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An economic recession is not the end of the world. Periods of economic downturns come and go and we all can survive and even thrive thru it.
The onset of a recession is not the time to panic. Even if you didn’t plan at all, there are things you can do and avoid doing during recession time.
No one knows exactly when recessions will hit the economy either, unless there is an impactful event. However, there are signs interpreted by the experts as pointing or not to a downturn.
For people who work freelancing, are entrepreneurs or investors, readiness takes a whole new meaning. The main reasons are uncertainty of earnings for the freelancers and risk taking for investors.
UPDATE: Since the original writing of this post, the economic conditions have changed due to the arrival of the Coronavirus. This event has created a lot of uncertainties. It is predicted now that there will be a recession 2020.
Make sure to read at the bottom of this post to find resources available for freelancers in hardships due to the pandemic.
How to read the signs pointing to a recession in 2020
The signs that point to an economic recession can be very technical and fundamental. Experts try to read the tea leaves to predict this event. You can spot things happening in and around the Financial sectors.
In the last couple of weeks the chatter is that there is a recession near. Some of the things being cited to support a recession include;
- The Federal Reserve Bank (the FED) decreased a key interest rate by 25 basis points. The Central Bank is trying to soften the blow to the economy in case it goes on recession.
- The FED injected liquidity to the banking sector. This last one makes experts nervous because very often it indicates pending problems.
But, there are other things happening in the economy that may indicate no recession is coming soon. The economy has positive signs.
- The housing starts are strong.
- Payroll data is mixed.
IMPORTANT: If you need emergency financial assistance, see this post listing 100+ program resources for hardships and emergency.
Ideas to thrive in a recession for Freelancers, Entrepreneurs and Investors
Freelancers, investors and entrepreneurs need to plan as normal for the unexpected. But, a bit extra planning doesn’t hurt if you are expecting an economic recession.
The reason being that economic activities slow down during recessions and probably your earnings will slow down too, as everyone reduces spending.
Safeguard your Income during an economic recession
The first thing to do when expecting an economic downturn is to be ready for layoffs, as some companies try to cut costs.
Also, if you are an entrepreneur or side hustler you can expect your revenues to slow down.
There are things you can do to shield your income from the unexpected loss of a job.
- If you have a job, put in extra time and upgrade your skills. These will make you more valuable as an employee. Also, network and have your resume ready for circulation. How to SEO your resume.
- If you are a freelancer or entrepreneur you can take on more work while the economy is doing good. Also, gain new skills or upgrade your current set of skills. These ideas can work if you’re retired also.
- Build up your savings with a side hustle. Your savings will help you wether the storm in case you lose your job or your income. There are so many ways to side hustle and build your emergency fund for a slow down or lose of earnings.
- Consider doing other types of jobs outside your area of expertise.
Side hustles you can do to build up your savings to survive a recession
Create and get on a budget to prepare for a recession and Beyond
Develop a budgeting system that you can stick to and be comfortable with. The cash budgeting system works because you only spend what you can afford to pay in cash. However, there are other systems that can help you budget your income and your expenses.
Use this budget to build an emergency fund to cover yours basic expenses if you lose your income or your job.
Build an emergency fund or examine the one you currently have
Having an emergency fund to cover basic expenses is important before or during a recession. Some financial experts recommend 3 or 6 months of expenses saved for an emergency.
I think 6 months should be the minimum you should keep in case you lose your job during a slow down. However, if you can build a cushion, you should. Remember that you’re preparing for the worst.
Things you should consider while building an emergency fund include; mortgage payments, rent, insurance, loan and credit card payments, your monthly food budget etc. If you have a budget, use it to help create the fund.
Keep your eyes on your expenses to thrive during a recession
Start cutting your expenses in the most obvious services you consume, like cable, memberships and groceries. However, make cuts on not so obvious services. For example, review your mortgage, loan and credit cards rates.
One of the positive side effects of an economic slow down is that you may be able to secure lower interest rates on debt. Determine if you can refinance the mortgage, student loan or the credit cards with high rates. Lower rate on large balance can deliver substantial savings.
Review your overdraft rate with your financial institution, see if you can get a lower one, while you have cash in the bank. In case of a crunch you may have to utilize your overdrafts protection.
Review your home and cars insurance to reduce expenses. Shop around for insurance and try to consolidate all policies under one company. These are ways to find lower insurance premiums.
Keep investing during an economic recession
You need to take care of the necessities of life for you and your family first. But, after covering for the basics you should really continue to invest your money as normal, especially for your retirement.
Pay yourself first using your company 401k or your own Roth IRA or other investment plans. Continue to invest as planned in any other investment vehicles, even during a recession. Do take measured risks and diversify, but don’t stop investing for the long term.
Actions to avoid during a recession
Part of a financial readiness plan to thrive during a recession involves things you should avoid doing. Avoid actions and consumer behavior that will drain your cash reserves.
- Don’t overspend or live outside your means
- Don’t incur new debt
- Don’t stop paying down your current debts – you should contact your creditors and discuss any hardships you may have. Try to renegotiate terms, like interest rate.
- Don’t take equity line of credit, unless absolutely needed
- Don’t stop saving and investing
Don’t forget to have fun
Even during trying economic times, fun and personal enjoyment are important for your well being. These activities can also boost your creativity. Check your city for free events and for discounts on entertainment and art.
Here is a list of 68 set-care tips for stay at home moms and everyone else
Bottom line on thriving during a recession
Getting ready for an economic recession is about making good decisions with your money, prior to the recession. Three things that are very beneficial during a recession are; having cash, securing lower interest rates on your debts and being flexible.
You’ll be in good shape during a recession as long as you can; make all of your payments, replace your income, continue to save and if you can negotiate better terms on your personal debts.
The best way to get this outcome, even if you lose your job or your earnings is to prepare for it and to take action before the recession. However, even during a recession you can take these steps to thrive.
You have any tips for thriving during a recession? Let us know below.
Here are some additional resources if you’re experiencing hardships and are a business owner, freelancer, independent worker.
The Freelance Union – for emergency and hardship help
The SBA Disaster Assistance – for emergency and hardships loans
New York Foundations – help for artists, actors and other independent workers