The talk that a recession would hit U.S. economy is increasing day by day. Nobody knows when this would happen but the past data showed that in every three years U.S economy faces a recession on average. Since the last recession that faced by economy was Great Recession of 2009, some analysts say that recession is overdue.
Although recession in the economy is short lived but they have a very severe impact on the lives of the individuals. Many individuals are still unable to recover from Great Recession. So, preparing for recession is not vital but also a necessity. In this article, we are going to suggest you some ways to protect yourself from recession.
1. Cumulate Savings
The very first thing you need to do is build up your emergency saving amount. In recession, most of the employers lay off extra staff and unemployment increases in the economy. If you were to face that situation, you must be prepared for it. If you have to leave your job, you must have enough savings for at least six months. And if you are married and have kids, you better build up your saving amount for a year.
2. Pay off high interest loans
The next strategy you can adopt to protect yourself from recession is to already pay off high interest debts and loans like credit card etc. At the time of recession when you already have limited amount of cash paying debt would become more costly and difficult. So, it is really better to ease yourself by already calculating your debt and paying them off before recession hits you.
By paying off your debt now, you would be able to save less for future as there is no future debt commitment and you would be able to buy only those things that you really needed.
3. Diversify Your Portfolio
It is quite clear that during a recession, stock market falls. To save yourself from market risk, you need to diversify your portfolio. You must make a balance investment in stock and bonds. While bonds would give you certain low-level interest rates, stocks would get you high-risk high-level returns. Remember, you must not shy away to hold some stocks in your portfolio because in the log-run, stock price would appreciate and, in this way, you would be able to enjoy capital gains.
4. Increase your skills
Skills that were popular back then when you were in school are no longer required. Most of the skills are replaced by automation and information technology. To keep up with the fast-moving economy, you need to up your skill game as well. Try to get certificate or professional degree in your area to become indispensable in your company or try to gain new skills that are hard to avoid in recession even. It is good to gain new skills when you have job and consistent income then to wander around in the times of recession for even lower wage jobs.