Everyone is talking about the upcoming recession. We don’t really know when it is going to hit us but we know for sure that at some point in the future it will, and because of that, I would rather focus on how I should prepare for a recession when it happens as opposed to try and guess when it is going to happen.
In this post, I am going to share the skills and habits that I developed over the years and that allowed me to survive the recession following 2008 and to be prepared for the upcoming recession.
Update: This article was published right before the Corona virus crisis august 2019…not that I predicted this crisis, I did not see it coming like anybody else but it gets to show that you should always be prepared for a potential crisis.
My story with the first recession following 2008 financial crisis
The first recession I have ever experienced was following the 2008 global financial crisis.
I was a college student in engineering school at the time and I remember seeing a lot of older fellow students struggling to secure internships or find a job.
Things were so bad that these graduates were in competition with much more experienced professionals who just lost their jobs as a result of a very bad economical climate.
I was hoping that things will get better by the time I graduate (which was going to be in 2010) but it did not get much better.
I was still able to secure an internship but I was told very clearly that there will be no job at the end of the internship because there was “no budget” for it.
That was quite a shock to me because I always thought that if I secured an internship and did well, I was almost guaranteed a job at the end of it…wrong. I suppose that was there way of telling me “welcome to the real world where 1+1 is not always =2”.
As I joined the company, I realised that my internship (and many others) was actually replacing in some way someone else full time job, who was probably among the unlucky suffering a job loss.
Few months later, I would eventually find myself in competition with those same experienced people as I was searching for a company to hire me at the end of my internship.
There were just so many available candidates on the market that companies were dictating their terms of employment and would use the recession as an excuse for years not to increase salaries.
As you can imagine, this is not the kind of start I was hoping for my professional life and it certainly did not paint a positive picture of employment security in my mind.
In short, having had this experience early in my career, I never felt secure in my job. And this made me want to always be prepared for a recession.
How to prepare for a recession
1. Multiple streams of income
If there is one thing that I have a strong view on, it is to never rely on one employment for your entire income. The idea that my income has to come from at least two streams is my new religion.
And this is not only to prepare for a recession but in general to have a protection against unforeseen events that could affect your job, such as:
- A lot of employers can sense when their employees (and their families) are financially dependent on that particular job for their entire income, which means that they know they hold the power in the employer-employee relationship. They know that it is difficult for someone who has wife and kids, a mortgage and car loan to pay off will not easily take the risk of moving jobs or pursing something they are passionate about and most of them will use that information to their advantage. Employers will identify these vulnerable employees and increase their workload, assign to you tasks that no one else wants to do, not increase their wages until they really have to and not offer promotions because they have taken them for granted. I am sure you get the picture. If you do not want to employer to take you for granted, you need to have financial security and let it be known by him.
- You could get sick of your job and just want to make a radical move towards a new career for example but still need to support your family financially, having other streams of income will help you make that transition smoother.
- You can have health problems that prevent you from doing your current job.
So if you have a regular job, and you are making money from your work, I highly recommend that you look into developing other streams of income and create insurance for yourself.
In the old days, people had limited options when it came to other sources of income. You could have a side hustle or/and invest money in the stock/bond/real estate market or a business.
Things have changed dramatically thanks to the internet and now we have so many options of side hustle that we can do from the comfort of our living room.
Here are some other streams of income ideas:
Get a side hustle
Getting a part time job is actually not my favorite method because you are still trading your time for money and you simply cannot scale up things but it can be the easiest thing to do. Whatever your skills, there is something for you but here are some ideas: Teaching English, Baby sitting, Dog sitting/walking, Modelling (if you are good looking), Joining Amazon flex, Freelancing (translation, online marketing, virtual assistant , graphic design, becoming an editor), Start a small business on the side, Become a coach online (you can use Clarity.fm or the Instantgo app or even your social media account), do paid online surveys, check out the best 6 online paid surveys that you can join for free)
Start a blog
Many people don’t know that you can make money from blogging , through advertising affiliate marketing or sponsorships, which is how I make a living myself, check out my 6 non-bs reasons to start a blog right now.
Monetize your Social media
If you are very active on social media and have a following, you can definitely turn it into your side hustle by getting paid for shutouts or recommending your favourite products and services.
Start a YouTube channel
Doing Youtube is the perfect side hustle if you are comfortable to put yourself in front of a camera because all you need is yourself and a camera and a topic to talk about, and the money you can make from it is just insane. Very similar to blogging, you make money from advertising ( except the rates on Youtube from ads are much higher so you make more money), affiliate marketing and sponsorships.
Affiliate marketing is the fact of promoting other products and services and getting paid a commission whenever your promotions efforts result in a sale. This can be a category on its own because there are a lot of people who are doing exclusively affiliate marketing without running a blog or a social media account
2. Reduce your expenses
The second thing you need to do is to develop good financial habits and start by reducing you overall expenses bill.
Financial freedom cannot be reached if you have very bad spending habits no matter how much money you make.
A lot of people complain about not being able to make ends meet or save any money when they are not even aware of how much money goes into their Starbuck coffee every month.
Start by dividing your expenses into two categories: the absolute necessary expenses and “nice to have” expenses and look into cutting down the latter category. Be honest with yourself, a lot of what we think is necessary is actually not.
Here is a list of things you could look into to reduce your expenses:
Reduce your rent
If you are renting where you live, you can look into moving out to a cheaper area in order to save money, flexibility is one of the benefits that rental properties offer so why not using it to your benefit to prepare for the next recession and save some money. For most people, rent represents the highest monthly expense and so is the money that you could potentially save from choosing to rent elsewhere. It does not have to be a long term solution, it can be temporary.
Sell your car
In my experience, having a car is really a huge expense compared to its benefits (especially if you don’t have a big family). You might have a heart attack if you sum up all the money that goes into your petrol, insurance, maintenance fees.
Instead, you could consider renting a car whenever you want or need one. You will reduce your overall transport bill, you will
Eat at home
There are so many benefits of eating home that go beyond the money you can potentially save. You can eat quality and healthy meals without having to go to expensive restaurants and breaking the bank. You also don’t have to worry about the portions or ordering a 3 courses meal because you are hungry ( which will always end up being more expensive for you). Another aspect of eating home is that you will most likely always pay the lowest rate of VAT for the food you buy. Did you know that you pay different VAT depending on what kind of food you eat? If you buy row food (not cooked), VAT is the lowest and if it is cooked even when it is sold in a supermarket, it still has a higher VAT.
Cancel unused memberships (Gym, Netflix)
Get yourself a pay as you go phone plan
If you are an average phone user, that way you only pay for what you use, most of the time you don’t really need unlimited data and unlimited calls and texts.
Reduce your grocery bill
A great way to reduce your expenses is to become smart about your groceries. Try to plan your groceries in advance, shop from discount grocery stores as much as you can, always look for discounts and offers in regular stores, do all your online shopping through Rakuten.com to earn significant cash backs, the service is free and includes many shops like Amazon, Sephora, Macy’s, and Walmart.
Learn how to fix things yourself
Thanks to internet, you can learn a lot of things on Youtube. You don’t always “need” a professional for anything you need to repair around the house with a little courage. I once changed my phone screen myself by buying the screen and get it shipped from China and I simply did it myself. I saved probably something like 50 to 100$ by doing this.
Learn how to do your hair and nails yourself
3. Start paying off debt
With the money saved from good money habits or made from your side hustle, the first thing you want to do is to pay off any outstanding Credit card debt, personal loan or student loan.
You need to figure out exactly what is the debt balance and interest rate you owe, and start paying as much as you can. A good thing to do would be to start paying off the smaller amounts first because it will create a positive momentum of paying debt.
You could also consider debt consolidation, sometimes taking on a new loan to pay old one can result in cheaper rates and even improve your credit score in some cases.
4. Build up your Emergency fund
You know that fund that you are only supposed to tap into when absolutely necessary but you have never been able to
If recession happens, you will be very glad to have an emergency fund, because you might lose your job, or experience a wage cut, or simply to face unexpected expenses.
It is the one thing that will worry free, I recommend you save 6 months of living expenses in your bank account.
5. Start updating your CV and get out there
Another thing you can and you should do ahead of a potential recession is to prepare for the worst case scenario, which is a job loss.
And the best way to prepare for that is to have your CV ready before it even happen and start putting it out there for potential opportunities. Trust me it does take time to update your CV and review it and you do not want to be doing that when you are stressed out and under pressure to find a new job.
If you lose your job and you have already established connection with recruiters, it will be a lot easier and faster for you to get a new job as you might be at the top of the list of candidates.
Developing your network is also another thing I highly recommend while you are still comfortable in your existing position. A lot of jobs are found through connections so this option should never be neglected. So before the recession, try to meet as many people as you can through work events, seminars and conferences.
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