The last 10 years have been an incredible stock run. Most people, especially those that were really young in 2008, don’t remember what a recession feels like. But as we know, market corrections are just another part of the economic cycle.
Unfortunately, market corrections aren’t always just about stock prices dropping. It is usually accompanied by less business activity and higher unemployment rates. There are a few ways to plan for this.
1. Make sure you have valuable, marketable skills
If you have spent the time and energy to acquire knowledge and skills that are valuable in the marketplace, you will become even more valuable in a recession because companies will be desperate for talent that will help them get through the tough times. The majority of individuals that get laid off are those that don’t have the skills to differentiate themselves.
2. Have a strong financial plan
If your current lifestyle is depending on the stock market to perform well, you are making yourself vulnerable to a lot of risk. People should be investing but they should only be investing money that they will not need for a long time. In the short term, no one knows what the market will do tomorrow or the next day. Over the long term however, the economy will continue to grow and flourish. You have to bet on the long term health of the economy and not on the short term emotional stability of the stock market.
It is also important to note that you want your investments to be diversified among many industries and asset classes. This protect you from major disruptions in individual industries. For example, if you were only invested in the real estate market in 2008 you would have lost everything.
3. Save! Save! Save!
Right now the economy is flourishing and everyone is spending lots of money. While this is good for the economy as a whole, individuals must remember that it may not always be this good. They need to be getting out of debt and saving for a rainy day. Things always come up, whether that’s in the economy or in our personal lives. If someone thinks it is hard to pay of their credit cards and save money now, just wait til a recession hits.
Conclusion: It is important to remember that just like the seasons, recessions will go and come and it is up to us to prepare ourselves for them. Recessions don’t have to be devastating if we can take advantage of the good times My motto: Have hope. Work Hard. Make your life incredible today.