Tips to get through a recession
Due to our persistent inflation that exceeds the central bank’s targets here in Canada and south of the border, it's unlikely we will see the interest rate cuts this year that many people are waiting for.
Those of you in variable mortgages or who have a mortgage up for renewal this year may already feel like we’re in a recession.
So, what should we do?
PREPARING
Preparation is the key, and if you can, start now so you can be ahead of everyone else.
The further we get into a recession, the harder it will be to pursue strategies to weather it.
Remember that a recession will not last forever, and really it is a necessary part of every healthy economic business cycle (which usually occurs one to two times every decade).
Here are the five basic tips to plan ahead for 2024.
Reduce spending, especially spending on non-essentials
Tightening up your budget is a necessity so that you can save an emergency fund.
Aim to save the equivalent of three months take-home income so that if you need to switch jobs, you have a buffer.
Pay off credit card debts and any other consumer loans
Do not carry balances month over month. You want to ensure you will have access
to credit if needed in the future, and the best way to make the banks believe you are a good lending risk is to eliminate any and all revolving debt.
Never live off your bank overdraft limit — and if you are using it and find it hard to stop, close it down.
Supplementing your income with credit must stop, not just in recessionary times, but in order to learn to live within your income. Be prepared to lose your job Always keep an up-to-date resume and consider updating your skills regularly.
If you can, why not consider a recession-proof job? These would include jobs in municipal, provincial or federal governments, jobs in health care, or jobs in education.
STAY INVESTED IN THE MARKET
Resist the urge to sell your stock portfolio or rebalance your positions. During economic downturns, people tend to liquidate underperforming stock.
This always tends to be the worst mistake one can make since you lock in the losses by selling during a market downturn.
Instead, look at this time as a “sale in the market” and a time to continue following your investment strategy by buying more stock that is now offered at lower pricing. Remember, the losses aren’t real until you sell.
STAY OPTIMISTIC
Your good habits are responsible for your success in life, but your bad habits are to blame for your problems and frustrations. Let go of the past thoughts that hold you back and wake up every day with a positive attitude towards your job, your family, and your life.
Often, people need to go through a difficult life moment to realize their full potential and believe in what they are truly capable of.
I honestly believe that even during the most challenging situations we each face, there has to be some good that comes from it. Rather than succumbing to a pessimistic outlook, try to challenge your current situation to find the good that can be gained from it.
Difficult times are temporary; learning from them makes us stronger. If we’re facing a recession this year,
then so be it. Remember that after every recession, comes an economic expansion phase when the economy starts growing again, governments pull back restrictions and we are in for a ride through another bull market.
Recessions happen on a regular basis, and this one is no different from the last. It is all part of our capitalistic cycle, so sit back and ride it out with everyone else, it won’t take too long until it’s over.
Good luck and best wishes, Christine Ibbotson, Money Lady