How to Prepare For a Recession

Note: We use AI transcription so there may be some inaccuraciesAnne-Lyse Wealth

Anne-Lyse Wealth

This is the reamers podcast episode 81. How you can prepare to face a recession. Today is August 2nd, 2022. Hello, world. Welcome to the dreamers podcast. I am Stephanie, Annie also known as Annie's wealth. I'm a financial coach and an author. I self published my first book, dream of legacy, a guide to help dreamers reach financial independence and build generational wealth.
 
 Anne-Lyse Wealth

In this podcast, I'll have conversations with experts and thought leaders who dare to follow their. You'll hear about their journey and their learning stories. I hope it inspires you. Dream is out there to live life on your own terms. Come on, dreamers. Let's change the world. This podcast is brought to you by dream of legacy. 
 
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So thank you. I appreciate. And now let's get back to today's episode. Hello, welcome to the podcast. I'm your host anise wealth. And I'm so happy that you've decided to tune in for today's episode of the podcast. If you are new to the show. Welcome. And I am so glad that you joined. I hope that you stick around and follow the show. If you have been along for the ride for a while, I appreciate you. Thank you for continuing to tune in week after week. So today I wanted to have a, so episode to talk about. How we can prepare for a recession. There's been a lot of talks about a recession looming in the past few years, but first of all, what is a recession? 
 
Well, technically a recession is a period of time. Where there is economic decline in, uh, the trade and the activity is reduced and that needs to happen two consecutive quarters for it to be a recession. And so how do we measure. Whether the economic activity of a country is declining is by looking at the GDP or the global domestic product, which is the Torah amount or the total value of all of the finished goods and finished services that are produced within the border of a country. 
 
During a specific period of time. So, you know, officially we are in the us in a recession. We've had two consecutive quarters of negative growth. But why is it important for people outside of the country, outside of the us? Because the us plays such a key role in the global landscape that often what happens in the us subsequently happens in other countries. 
 
Recession typically happen every decade or so, but one of the common misconception, especially if you haven't been through a recession before, or you've only been through the recession that happened 2007, 2008, is that a recession is a long period of economic decline, but on average recessions last about 11 or so, but during the great recession of the late two thousands, it lasted 18 months. It was also the longest recession. Since world war II, recessions are a gift and a curse in the sense of the economy is not a stable. The hiring opportunities are not as available. And, you know, you have to really do a better job at controlling your spending, but it's also an opportunity because a lot of people actually build wealth or expend their wealth during a recession. 
 
Right. A lot of companies that are doing great today started during. A recession from Microsoft to trader Joe's to CNN and so many more really. So I think it's important to prepare as much as you can, so you can take advantage of the opportunities that a recession can bring. So in this episode, I wanna share what you can do to be prepared for this recession. 
 
One thing that you can do is keep your debt low and as much as you can pay off any debt that you have with high interest rate. That's a good thing to do, really, whether there's a recession or not, but especially important during a recession, because during those times, GDP is down companies. Most companies are not doing as well financially. 
 
They are more layoffs, fewer opportunities for workers to find better jobs. And. The natural and reasonable thing to do during those times is to reduce your spending. And so, as we reduce our spending, a lot of companies don't do as well. And so when it comes to credit card companies, specifically, they have to minimize risk. 
 
Right. So they are going to pay even closer attention to who they extend credit to. They want to make sure the person is going to pay their credit card or the debt that they have extended to them. But in to move your time, sometimes what actually happens is even if you've already received a line of credit, even if you've already received a credit card, The company can decide to cancel your credit card or reduce your credit limit, which both can have a negative impact on your credit score. 
 
So you wanna be proactive by paying off debt so that you don't end up. In that situation. If for whatever reason you were to face a layoff, or if you're self-employed, your business is not doing as well. You wouldn't have this additional pressure of having this high interest rate debt that you need to pay off, but you are now. 
 
No longer sure that you can afford to make the payments not paying your credit card on time will ultimately negatively impact your credit score, not paying off your credit card balance at the end of the month will result in you having to pay interest. So as much as you can minimize your debt, that is key. 
 
During recession times, it will considerably reduce potential stress levels. Number two, what you can do is continue to invest on a dollar cost average basis. So instead of dumping big amounts of money in the stock market, at specific point in time, you can commit to investing a certain amount on a weekly basis. 
 
And continue to invest because during a recession, there's a lot, a lot of volatility in the market. So you might decide to invest when the market is up or when the market is down. So to even things out, you invest no matter what is going on and you do it, you can do it weekly. You can do it biweekly. But the most important thing is to keep investing and not be afraid or not, not be scared. 
 
See your numbers going down because there's a lot of volatility in the market and it's up and down. So continue to invest on a dollar cost, average basis. Number three, pay close attention to what you're investing in. Right. I've shared this on the podcast before I am mostly an index fund type of girl. I do not pick individual stocks except for a handful of them that I have in my portfolio during times like this, I do even more so of, uh, index fund investing, but I also look at certain individual stocks that, you know, are companies that. 
 
Really like that I would want to own for many, many years, if I'm looking at the company, the stock price average and how it's doing, how it's performing at the moment, then I may decide to, in addition, also purchase a few individual stocks, but my strategy is mostly index fund. It continues to be mostly index. 
 
Do not obsess about the fluctuation in your portfolio. So during times like these, I do not look at my portfolio more than once a month because I don't want to obsess over an investment that I've made. That would lose money if I were to sell it today because the market is down at the moment. What I know is that if you hang in there for the long term, you will make money. 
 
And so in the meantime, while the market is adjusting up and down, I don't think that I need to spend too much time obsessing over. How much money I quote unquote lost because you don't lose until you sell and I'm not planning on selling. So I would much rather continue to dollar cost average so that I can take advantage of the market. 
 
Downturn. Number five, have more cash on hand. During a recession because there's a lot more instability. One of the things that you can do is ensure that you have enough cash available in case there are opportunities to invest so that you can take advantage of them. Remember what I said earlier, a lot of people extend or expand their wealth during recession times. 
 
So if you can set aside money just in case you will do nothing other than help. And so when I say cash, I mean cash or cash equivalent, which is anything that you can easily convert into cash, but it probably shouldn't be stocks, right. Which could significantly and negatively impact the total balance of your investment. 
 
Temporarily. Another thing that you can do, which goes along with the previous point that I made is review your expenses to encourage cutting in some area. And not spending as much. The sixth thing that you can do that can benefit you during a recession is to increase your income. And one of the ways that you can do that is by starting a side hustle, which will also help protect you in case of a potential lay. 
 
I recently wrote an article about studying a site hustle, what it takes to be successful. I invite you to go read it. The article is linked in the show notes in the article. I featured tips by are that Johnson hall from a and B credit consultants. And Jan Torres Rodriguez from Thero podcast. They are both side hustle experts in the sense that they've helped. 
 
So many people start successful side hustles. The six and final tip is to invest in. Yourself invest time so that you can improve or learn new skills, which will make you more marketable, more competitive as a job candidate or as a business owner. Those are the six tips that I wanted to share today to help you recession proof your life, to get you started so that you can be prepared for this recess. 
 
 I hope you enjoy today's episode. And I will see you back here next week for under episode of the podcast. As I mentioned earlier, recessions are bound to happen, how you prepared for them and how you react to them is going to determine whether it's going to have a positive impact on your finances or negative one. 
 
And of course we wanna be on the side of being able to use this recession to increase our. Wealth. Thank you for listening to today's episode of the dreamers podcast. You can find the episode show notes and all of the links mentioned@dreamoflegacy.com. If you like today's episode, here's what you can do to support me and help more dreamers. 
 
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And let me know what you liked about today's episode. All right. Dream. That's it for today. I will see you back here next week for another episode of the dreamers podcast. Okay. We come to build this legacy. This podcast is for general information purposes only. It is not intended to provide any tax legal, financial planning, insurance, accounting, investment, or any other kind of professional advice or service. 
 
Please consult with an appropriate text, financial or legal professional to receive appropriate advice based on your situation.