Economic Slowdown can be a bad time regardless of your financial status. It can cause a huge strain on your finances and plans for the future. While economic expansion makes people optimistic and hopeful about the future, an economic slowdown is a part of the economic cycle of any country. However, it is impossible to predict when the economy will plunge into an economic slowdown. While usually, an economic slowdown is preceded by market crashes and falling investor confidence, there can be times when a major event triggers an economic slowdown without any warning. Hence, it is important to be prepared for the next economic slowdown at all times. This preparation should begin when the economy is booming. Here are some tips to help you prepare for the next economic slowdown.
1. Have a strong Emergency Fund
An economic slowdown usually involves job cuts or salary cuts. The point is that there could be an interruption in your income. Hence, you need to be prepared to manage such periods without panicking. An emergency fund that can help you take care of at least 3-6 months of expenses is the minimum that you should target. You can choose to keep this fund either in a savings account, fixed deposit, etc. the point is that the money should be readily available when you need it. Avoid any urges to invest your emergency fund when the economy is expanding as you might not have the opportunity to withdraw it when it goes into an economic slowdown.
2. Prioritize debt repayment
When the economy goes into an economic slowdown, you will be better off if your debts are already repaid. This will ensure that you will have more spending potential when prices tend to increase and economic slowdown strikes. Focus on the highest-interest debt like a credit card and work your way downwards. You can also look for refinancing options to reduce the interest liability of your debts.
3. Budget for different economic conditions
Once the economy goes into an economic slowdown and you start feeling the pressure, creating a budget can be difficult and frustrating. Hence, when the times are good, create a budget that you will be able to follow during an economic slowdown. Make a list of expenses that can be avoided or reduced to bring down the overall cost of living. By preparing a budget beforehand, you will be calmer during an economic slowdown.
4. Create a Balanced Investment Portfolio
When the economy is booming, people tend to take higher risks with their investments. However, if you suspect a economic slowdown or even an economic slowdown around the corner, then it might be a good time to reconsider the high risks taken by you. A balanced investment portfolio that works on the concept of diversification and hedging can withstand almost any economic storm. Always remember that economic slowdown is a part of the economic cycle and just because the economy is heading towards one, you should not deter from your long-term financial goals. By creating a balanced portfolio, your money will continue to work towards achieving those goals while you battle with the current economic conditions.
5. Create an additional source of income
Diversification should not be limited to investments alone. Even when it comes to income, you must look at diverse ways of adding sources of income. There is a huge freelance market available today that can quickly be transformed into a good source of side income. This can come handy during a economic slowdown.
6. Will your job survive a economic slowdown?
This is an important question to ask yourself if you think that an economic economic slowdown is around the corner. We understand that answering this question is not easy. While your employer usually assesses your performance, you must intermittently check how your employer is doing financially. You can also start taking steps to increase your value in the company by adding more skills or taking on more responsibilities.
7. Ensure that you have a good credit score
While economic slowdown can be scary, sometimes they also bring with them lower real estate prices. If you are planning to buy a house right in the middle of a economic slowdown, then having a solid credit score can be handy. Markets don’t stop during a economic slowdown – they just become more careful. So loans are given out but only to borrowers with a good credit score. Considering the period for which the economic slowdown can continue cannot be predicted, it is prudent to enter the phase with a good credit score.
8. Prepone any medical expenses that you have been putting off for later
Human beings have a habit of procrastinating. We tend to put things off for later for some or the other reason. While we are not debating the reasons, if a economic slowdown seems inevitable, then you will do better to prepone any medical expenses that you have been putting off for later. During the economic slowdown, your income can get affected and the prices of medical treatments can rise. Hence, it is better to get that expensive medical treatment done before economic slowdown hits.
9. Get in touch with all your contacts
Economic slowdown is usually a stressful time when you might need the assistance of someone you once knew. Reaching out to such contacts out of the blue under duress can be difficult. Hence, start touching base with your contacts now. You don’t need anything from them now hence it will be a good way to start staying in touch. Also, if you do need their assistance during the economic slowdown, then it won’t be as awkward.
10. Don’t make decisions based on fear
People who are not prepared for a economic slowdown tend to make decisions rooted in fear and emotions. It is important to remember that a economic slowdown is normal, in fact, good for the economy. A continuously expanding economy is more dangerous than an intermittent economic slowdown. Prepare yourself in advance so that you don’t panic when the economy goes into economic slowdown and you see it through with ease.
The best part about following these tips is that even if a economic slowdown does not hit, you will be in a better position to handle any slowdowns as well. In other words, you will have a good foundation regardless of the way the economy is moving. In today’s times, things change fast and predicting a economic slowdown is impossible. However, if you are prepared for it at all times, then you stop worrying about it and start living your life to the fullest. We hope that these tips help you become one of the few people who smile even during a economic slowdown. Get cracking today!