Prioritize Building up Your Cash Reserves
As we’ve already covered , the longevity of the current bull market has worried people. All of this should end over time, and some economists are forecasting a recession by the end of 2020. Assuming this is the case, you will have about two years to get your finances in order. What should you do first?
If you have a reliable, long-term financial plan, then stick with it – there is no reason to ruin everything because you are worried about the economy collapsing. And if you are relatively young, then definitely don’t run away from stocks. Time in the market is important , not time in the market . But if the recession and its impact on your finances are causing you significant stress, there is one step you can take to help yourself and potentially reduce your anxiety: start saving more money.
How? This does not necessarily mean reducing your investment (although any money you need in the next three to five years should not be in stocks anyway), but it does mean you have to make hard choices about what to do. give up in daily life. which you don’t necessarily need. Eating (and drinking) less outside the home, canceling an expensive gym and / or cable TV subscription, staying in a less expensive apartment for another year or so, not updating to the newest iPhone when it comes out soon, etc. However, you can save money in your individual situation, you know better than me. All of these small savings can be added to a high-yield savings account, short-term certificate of deposit, or used to accelerate debt payments right now. Choosing to focus on paying off your debt will become one less concern when things start to decline.
If you don’t have a reserve fund for three to six months, this should be your top priority. Because with a recession, the likelihood of layoffs or reduced working hours increases, depending on your industry.
There is one more thing to think about now before things go downhill: make a plan B. If the worst happens in a year or so and you lose your job, do you have a plan to make money fast or hold on afloat? The time has come, like now, when everything seems to be good, and you should think about it. This can mean making a list of companies or people you can turn to if your business is shaken, or reaching out to old work acquaintances to get their attention again. It can also mean building skills now that you can use later.
But most importantly, create yourself a cash cushion. The more unstable your job (for example, you are a freelancer or work in an unstable industry), the more money you will need on hand.