Recession is a normal part of the overall economic cycle. Economics is like anything else. There are ebbs and flows. So the fact that the U.S. might be headed for another recession at the time of this writing shouldn’t surprise anyone. The only concern should be how serious the recession is. If you are ready for it, you can survive unscathed. You can even thrive.
The idea of thriving might seem opposite to everything you know about recession. But remember this: recessions offer as many opportunities for success as they do for failure. It is all in how you approach it. So here’s how to survive, and thrive, during a recession:
1. Minimize Risk Exposure
By their nature, recessions increase financial risk. Things cost more during a recession. Incomes do not keep up with inflation. Banks are more careful about lending and less lenient when borrowers default.
Your biggest advantage in a recession is limiting your risk exposure. Don’t do things that could increase the chances of you defaulting on credit or overextending your resources. The perfect example is taking on new debt. Don’t do it.
2. Defer Capital Expenditures
If you own a business, seriously consider deferring capital improvements until the economy rebounds. In fact, be extremely careful about all capital expenditures. You don’t want to take on new debt at a time when risk is high. Why? Because that debt will ultimately cost you more money.
3. Adjust Your Investment Portfolio
You can thrive during a recession by adjusting your investment portfolio. Maybe your stocks aren’t doing so well. However, you have a few commercial properties that continue generating income. Perhaps it is time to move more money from stocks into real estate.
The experts at Salt Lake City’s Actium Partners, a hard money lending firm, see some of the best real estate deals during times of recession. Stocks and bonds don’t tend to offer very high yields when the economy goes south, but real estate continues to generate income. Perhaps an adjustment to your portfolio is in order.
4. Sit on Your Equity
You may have equity built up in your personal holdings and investments. That’s good. Times of recession are times to sit on that equity rather than utilizing it to make frivolous purchases. Do not use equity to buy consumer goods. Instead, just sit on it for the time being. If a lucrative investment comes your way, that’s the ideal time to leverage your equity.
Granted, people find it very difficult to sit on their equity during tough financial times. They want to use it to bail themselves out of financial trouble. If it is a matter of defaulting, by all means use your equity. But if it’s just a matter of making your life more comfortable, resist the temptation. Sit on your equity. It could end up making a difference later on.
5. Don’t Quit Your Job
Finally, it’s not wise to quit your job during a recession. Recessions have a habit of causing companies to scale back. Some will not hire anyone during a recession while others actually lay people off. You could be in for a rough ride should you decide to make a career move in a bad economy.
The one thing about recession is that it doesn’t last forever. Every recession eventually subsides. Inflation slows down, unemployment drops, and earning power goes up. Do well during a recession and you stand to be in a very strong position when the economy strengthens. You could even come out considerably more wealthy.
It’s possible to both survive and thrive during a recession. You just need to know how to do it and be willing to adopt the proper mindset.
