“ Surprise yourself everyday with your own courage“
The pandemic taught us many lessons one of which is that the world is a global village. Nations depend on other nations. The supply chains are intertwined, health care systems are cross dependent not to mention how economies rely on each other. So, it is no surprise the recession is being felt globally, with rising inflation and interest rates.
Typically, recessions don’t last long however there is nothing typical about what the world went through with the pandemic and so it is safer to plan with a long stretch in mind (at least three years).
It follows that the best time to plan for a recession is before it starts, however the next best time to do it is now. So that you not only survive but thrive. Accordingly, what should we do during a recession?
- Make sure you have an emergency fund
Recessions come with a shrinking purchasing power because the cost of doing business goes up. One of the consequences of this is businesses will want to have bare minimum costs. Staff costs may be affected leading to lay-offs and redundancies. If you are in business yourself and sales are shrinking, you need to bridge the gap between paying your fixed costs and the income from the business.
The importance of an emergency fund cannot be overemphasized. Ordinarily 3-6 months’ worth of expenses will be sufficient, but during a recession, you want to have 9-12 months’ worth of expenses at a minimum.
You don’t have an emergency? No problem.
Start saving today!
- Cut the fat in your expenses
Look at your expenses in a month, in three months, six months, etc. What can you reduce from it? Would you be ok without paid TV for a while; would it be ok if you purposed to eat at home more often than you currently are. Basically, what can you live without, and life will go on ok. For some of us, that decision may be as big as, it may be time to move to a smaller house, move the kids to a more affordable school.
Some of the decisions may hurt to the core but are necessary for survival. It doesn’t mean that they are permanent, it just means that they have to be done in this season, and we can re-adjust in the better season.
- Become a Bargain Hunter
Nothing like a scarcity of money to get creative juices going. And this is not to say that you have to give up all of life’s little pleasures…
Nope, that would be no fun at all. Which would be a real shame.
Hunting for bargains can be exhaustive, and a lot of fun too. Find cheaper alternatives for the things you enjoy. If you love meat, instead of the supermarket, buy it at the slaughterhouse, it is cheaper and your shilling gets you more. Buy your groceries from the market, and avoid the estate corners stores.
Bargain hunting means you have to plan ahead so that you don’t run out of stuff in the middle of the week or month, which makes you more aware of your expenditure, which overall is the point.
For your must-have luxury items, is it cheaper to source them from somewhere else other than your local? Could you import them in bulk?
Like I said, the fun is in hunting.
4. Put up all your defenses
There is nothing as bad as being in a financial crisis and suffering a loss in the midst of it. During a financial crisis you dare not cut back on the insurance needs you have. Make sure your medical cover is up to date, your car insurance, Life covers, and domestic insurance. Keep up with all the necessary insurances in your business such as workmen’s compensation for your employees, their medical cover, insure your stocks and tools of trade, etc.
Playing defense also means making sure your Retirement account is up to date with your monthly payments. If you can enhance it, even better.
The tendency when cash is low is to do away with what you consider “unnecessary” or not “urgent cash spend.” And that is where the rain starts to get you.
5. Invest More, also Cash is King
During periods of recession, it is important to have cash. In this case, cash is king because you can grab opportunities especially where there are discounted assets. However idle cash in large quantities is counterproductive because inflation will eat it up.
The balance is to have enough cash easily accessible so that you can be able to grab opportunities as they come about, but that cash should be earning you something in the meantime. So investment vehicles such as money markets and short-term treasury bills such as 9-day or 180 days will ensure that you earn something as you wait for the right opportunity.
6. Increase your Income
It is said recessions create the biggest opportunities for millionaires and billionaires to emerge. People hunker down and only spend on what is absolutely necessary, luxury spending is put on the back burner. It follows that if you have a way to serve your customers with the essentials, they need then you will benefit from the rationing of funds.
Never mind that the market looks crowded and what you sell is being sold by 15,000 other people. Differentiate yourself. Are you able to have a faster turnaround time than your competitors? Therein is your edge. Are you able to sell your product or service cheaper than your competitors without compromising quality? Bingo!
How about customer service. Are you in a class of your own?
You need to invest in good customer service because then you retain your current customers while recruiting brand ambassadors at no additional cost to you.
It is a no-brainer if you ask me.
There are so many opportunities to give a hand up to the community and there is always a shortage of resources. Be purposeful in giving back to the community you live in. Whether it is by giving your time to community projects or sharing knowledge with others as a resource person or giving funds towards a worthy cause, all this is key. Give because economic pressures tend to leave the most vulnerable members of society worse off. The most affected are the marginalized groups and the elderly, who may not have close family taking care of them.
Even if you are struggling in this season, giving of yourself will make you realize that your situation may not be as dire. You will feel better about yourself no doubt, but you will leave humanity better. So, in whatever way you want to give, please give. You will be better for doing it.
When times are tough and you find yourself in a hole, the best thing is to stop digging and find a solution, and this is for you in case you feel unprepared to get by in the current economy, try to do your best to live within your means and be resourceful in increasing your income stream. Above all hang in there, because recessions, come and go.
Cheering you on, to your success!