It can happen in a heartbeat…or so it seems. One day the economy is fine and you feel you are on your way to bigger things. You have your debt under control, you received a raise not too long ago and every month there seems to be more and more money left. And then…*boom*. Suddenly it is front page news. Everybody’s unsure about retrenchments and corporate restructuring etc. But what can you do to prevent being caught off guard?
1) Be prepared
One of the most valuable assets you possess is undoubtedly your house. And this might be the first to go once the recession hits. Don’t be caught off guard with your mortgage and later be unable to pay up each month.
Do this: Save as much as you can each month. Cut back on luxuries and focus on necessities. Also, increase your monthly mortgage payment by as much as you can. By paying it off as soon as possible, you might be a little more relaxed during tough times.
2) Get fit
We’re not talking about your body here, but you have to trim the fat before you get leaner on your finances. The fat here, is debt. Basically you have three golden rules to recession proof your life; 1.) Get rid of debt, 2.) Get rid of debt, 3.) Get rid of debt. By losing your mountain of debt it will be much easier to survive any recession. Normally you gain about 8-10% returns on your investments, but debt can charge up to 14%, do the math.
3) Point your arrow in only one direction
Sometimes paying for items you do not own yet like a car, furniture etc, can eat away at your salary like there’s no tomorrow. If you don’t plan on incurring any more debt, consider debt-consolidation packages. This will allow you to pay the company where you apply for debt consolidation, like your Bank, a much lower premium per month than paying for all of those items separately. You have to own a house to apply for this to offer as security.
This is a little trick many investors and financial advisors use to pull through a recession. The average Joe won’t do this because of fear and lack of self discipline. Knowledge counter-act fear. The key is to take on ass much extra debt as you can, without paying too much for it while NOT USING ANY MONEY. Banks lend you money not when you really need it, but when you can afford it. So if you foresee a cash-flow crisis like a recession, max out your credit. This includes credit cards. Apply for more credit cards even. Many credit card companies allow you to borrow money for up to 55 days without paying interest. And when you find yourself in dire straits, this little trick will help you pull through.