Amidst COVID-19, the headlines present two divergent realities right now. While many headlines are optimistic about states reopening and the economy getting back “on track,” some speculate we’re already amidst a recession. While currently we’re not yet considered to be in a recession, there’s a possibility we will be if such trends continue. Now is the time to seize opportunities.
These are extraordinary times—what you take from that is up to you. We’ve seen hardship and pain amidst COVID-19, but we’ve also seen stories of human connection and triumph.
While things are looking up, and certain areas are flattening the curve and reopening, much of the country is experiencing high rates of unemployment. Businesses large and small are working hard to make ends meet while keeping their employees and customers safe. Many are innovating to meet the current needs, going virtual or making deliveries. We’re seeing gig-businesses like Door Dash and Instacart thrive.
Yet the stock market is on shaky ground, and the real estate market has softened.
It’s time to take control of your mindset and your finances, so that you can thrive during a recession in 2020. Prepare your mindset, your money, and your life, then get ready with the following ten strategies for weathering the storm.
Tips for Thriving During A Recession in 2020
1. Build a Bigger Emergency Fund
We’ve already seen a wave of unemployment due to COVID-19, along with fewer raises and more business bankruptcies. If you have three months of expenses saved up, aim for six months.
In the circumstance that you have fluctuating income, own a business that depends on a healthy economy, or have low seniority in your job—building up a years’ worth of expenses is not too much.
Remember, you’re preparing for a time of uncertainty. Keep reading for suggestions in improving your ability to save.
2. Reallocate Your Funds
If a large chunk of your change is in stocks and bonds (whether it’s your portfolio, or your retirement accounts), it’s time to rethink!
In order to not only weather the recession “storm,” but thrive, you have to think of safety and liquidity. Not only will money in stocks and bonds be at extreme risk during a recession, but it’s also much more difficult to access.
By reallocating your money to cash equivalencies and “safe harbors,” not only will you be protected, you’ll have money to invest in assets that are “on sale.”
In the short term, consider CDs, savings accounts, and treasuries. Your 401(k) or IRA administrator may also be able to help with fixed rate investments.
If you’re thinking of the long-term, look no further than our favorite solution: high cash value whole life insurance. Read one of our latest articles for more information on how whole life insurance can fit into your lifelong financial strategy.
And if you’re in your 80s or older, a single premium immediate annuity can be an excellent income-producing choice. SPIAs offer safe money, and have guaranteed interest rates.
3. Nix Consumer Debt
The less consumer debt you have, the better. Most credit cards have rates in the double-digits, and you don’t want to be carrying that with you. Additionally, pay attention to “introductory rates” that might be expiring—you’ll want to eliminate that debt first, before those rates increase astronomically.
If you’re wondering how to pay off this debt, consider two of the most popular methods: the debt snowball, or the debt avalanche (also known as a debt ladder). Determining which one is best for you depends on your circumstances—check out this YouTube video for a more detailed explanation of each.
4. Assess Your Living Costs
If you’re living paycheck to paycheck, as more than half of Americans are, spend some time assessing your fixed living costs. If there are opportunities to lower your monthly bills, do so! Don’t get so fixated on interest rates that you’re paying more than you need to on rent, mortgage, etc.
Don’t wait until things get too serious to live on less. Doing so voluntarily can even help you with #1 on the list—saving. Here are some ideas:
- For any consumer debt you can’t pay off completely, seek to lower your interest rate
- Eliminate memberships or subscriptions you don’t use or can live without (you’d be surprised how effective this is in freeing up some cash)
- Replace cable with a streaming service—even if you subscribed to all the major streaming services, your costs will be lower than the average cable or satellite subscription. And, no commercials.
In addition to cutting costs where possible, don’t take on additional costs if you can help it. Now is probably not the best time to buy a new house or car (unless your circumstance says otherwise). What’s more, don’t refinance your 30-year mortgage to a 15-year mortgage with higher payments, just because the interest rate looks nice.
5. Invest in Your Greatest Asset
Your greatest asset is yourself—take the time to invest. Especially since many of us are finding ourselves with time to spare.
How can you make yourself more valuable in the workplace? Perhaps there are new skills to learn or habits to create that make you more marketable. Udacity is a useful resource that specializes in tech training for high-demand fields. These programs are affordable, and can be completed in months. Don’t have access to a lot of extra cash? There are a number of certifications and online courses that you can take for free—HubSpot, Skillshare, and Coursera are all similar platforms.
If you’re looking for a new position, make sure you’re staying well-networked (both in and out of your current industry). It’s ideal to build a social network before you’re unemployed, but it’s not too late. These days, opportunities are closely intertwined with who you know. Furthermore, don’t be afraid to innovate or look for unique opportunities that arise.
Perhaps, your industry is even in higher demand than usual, and it’s time to negotiate a raise. Ramit Sethi’s “Ultimate Guide to Getting a Raise and Boosting Your Salary” has advice to help you negotiate.
6. Establish a Side Hustle
There’s no time like the present to build a second income stream—and doing so will go a long way in establishing your emergency fund and creating cash flow.
- Smartphones make it easier than ever to participate in the gig economy. If you can dream it, there’s an app for it. COVID-19 has boosted the market for delivery services, since many can’t go out and still need groceries and other essentials.
- Do you craft, make art, or flip vintage clothing? Etsy is a great place to start selling your goods. Or, clear out your closet and make a little cash on a selling app like Poshmark, Mercari, etc.
- Retired? Turn your expertise into a consulting gig.
- Take your skills online—become an online tutor , a content creator, or otherwise. Just because we’re social distancing doesn’t mean you’re without options. This is prime time to develop an online business.
- Lawn care, dog walking, and more aren’t just for teens. Various home services can be a viable business, and people still need such services, pandemic or not.
- In the middle of buying a new home? Consider renting your old home for some positive monthly cash flow.
7. Work on Your Credit Score
During a recession, credit standards tighten up. Although we still encourage you to downsize your debt, a good credit score will ensure you get better rates in the event you want to finance or refinance something. This is especially important if an emergency comes up, and you don’t have the required liquidity from your emergency fund.
Furthermore, if you’re interested in a job which requires you to handle money or obtain a security clearance, employers will often check your credit score.
Get a handle on your score now, and that’s one less thing to think about.
When we say diversify, we don’t mean diversify your stocks and bonds. For true diversification, creating a portfolio of different asset classes is crucial, and non-corelated assets are the foundation.
Non-correlated simply means that the value of those assets won’t rise or fall based on the stock market. These assets are ideal because they offer certainty.
Cash flowing real estate, life settlements, oil and gas, and whole life insurance are a few assets with no correlation to the stock market. There are pros and cons to each, so careful assessment is necessary for a solid strategy. A Prosperity Economics Advisor can help you optimize your strategy to meet your specific desires.
9. Prepare Your House
While most of our recession advice is financial, don’t forget your home! Are you equipped for a power outage, natural disaster, or a scenario of civil unrest or bank closure? Could you go a week without access to cash or groceries?
To prepare, consider the following:
- Readily available basics: do you have non-perishable foods, potable water, batteries, and an alternate heat or power source?
- Cash. It’s a cliché to have cash stuffed in your mattress, but it’s not such a bad idea. Well, the cash part, anyway. Have a stash available (and safe), where someone you trust can find it if necessary. For alternatives to the mattress, which is the first place thieves will look, check out this article.
- Prep your car. Having a gas can, jumper cables, blankets, and emergency meals in your trunk are helpful in case you can’t return home as soon as you think. Even roadside assistance can be unreliable in the event of a natural disaster.
- Garden! Gardening helps your practice self-sufficiency, and is also a great way to eat more fruits and vegetables.
Such preparations can feel like a strain when money is tight, but you’ll feel more comfortable if you are prepared. Don’t forget that canned goods and certain household items can be found at your local Dollar Store. Preparation needn’t be costly.
10. Bulletproof Your Mindset
Amongst all other preparations, it’s perhaps most prudent to prepare your mindset. Thriving begins in your thought.
We like to start with gratitude. And while it’s helpful to be grateful when times are good, it’s powerful to be grateful when things seem bleak. Additionally, practices like meditation, mindfulness, and prayer have proven to lower stress and improve health.
Next, consider unplugging. COVID-19 has put our country into “disaster-news” mode, but that does nothing to improve our mental health. Being glued to mainstream media is the fastest way to tank your positive mindset. Instead, focus on positive news, nurture your relationships, and learn from your mentors. We’ve seen extraordinary good come from these extraordinary times—focus on that.
The key to having a bulletproof Prosperity-mindset, is to be mindful of how your thoughts shape your experience. You have more power than you know to create prosperity, regardless of what the news says. The current economic downturn could turn into a bona-fide recession in 2020, but you don’t have to participate by being in scarcity mode.
Your personal economy is not solely determined by outside forces. The people who thrive most during recessions are those who keep a positive outlook and see opportunities as they arise.
So If There’s a Recession in 2020…
Don’t get stuck in micro-thinking, keep your mindset positive. Regardless of how the economy progresses from here, the steps above will help you feel prepared to thrive and seize opportunities. Don’t wait, put yourself ahead now.
Looking for Additional Guidance?
Locate a Prosperity Economics advisor to help you strategize and prepare with non-correlated assets and investments.