Well, no doubt you’ve heard or seen the headlines… “We are entering a recession! Quick, everyone hide because the sky is falling! Grab a helmet and take shelter!”
What Is A Recession?
Let’s talk about this. And we might as well start with the basics. What even is a recession? Technically speaking most economists would classify a recession as when the economy fails to grow for 2 consecutive quarters in the same fiscal year. During a recession, the country’s overall economic output declines, unemployment increases, wholesale retail sales decrease, businesses cut their spending, and manufacturers produce less goods.
So, basically the economy struggles, because no one wants to spend their money. We are trying to keep as much cash as possible for the necessities, because wages are down or non-existent.
Full disclaimer this is not financial advice – simply guidelines. If you need help looking at your specific financial situation Schedule a free call with one of our professionals.
Here’s our tips for how to navigate a recession so you can not just survive, but actually increase your wealth!
Ease Off the Scary News
My first piece of advice is to stop watching the news so much. It can be toxic and make you think the world is ending. No matter what news source you watch or listen to – ease off a little. Instead, put into practice a few of these tips to get you set up to survive this recession and come out on the other side!
Stop Stressing Over the Balance
Among other things to look at less… stop looking at your 401k balance. You have not lost thousands of dollars so just relax! The truth is that you have not lost ANY money unless you sell your portfolio. Which is a terrible idea. Just continue your automatic draw and stop looking at the balance.
Pay Off Your Debt
One thing that we typically see when going into and coming out of a recession is interest rates rising. This is why it is imperative that you do everything you can to start paying down debt. If you have not started this process yet. Here is your wake-up call because with interest rates possibly rising in the near future you don’t want to be stuck paying thousands of extra dollars to the bank. Now I won’t go into the weeds about the best way to pay down debt – instead, click here for our walkthrough of the debt snowball.
Cash Flow Management Plan
If you have not set up profit first for your business yet, there is no better time than now. One of the major benefits of the Profit First Cash Flow Management System is that you know EXACTLY where all of your money is going. With that we saw clients during the recent COVID-19 pandemic actually GROW during the worst times the economy had seen in recent years. Profit First gives you the framework and freedom to understand how much money you need to survive and how much money you can use to invest in your business through your profit account. If you want to learn all there is to know about the Profit First Cashflow Management system go read our blog here. If you’re a microgym owner, go grab our book Profit First For Microgyms. Implementing Profit First will help you with our next tip, which is to save up a little emergency fund. There is nothing more liquid than cash and it doesn’t hurt to have some saved up in case of a true crisis. 3-6 months of your personal and business expenses should serve you well
Big Scary Bear Market
Now, what is all this nonsense about a “bear market”? What the heck is that?! Economists and most professionals love to make up names, don’t they? A bear market simply means that the stock market is scary, meaning stocks are at a crazy low. This is one reason it is believed that we are entering a possible recession. Everyone is panicking at how low the stock market is. Well, let me ask you this, would you panic if your favorite pair of shoes went on a 20% discount? NO! You’d buy the crap out of those shoes. The same can be said for stocks.
Look For The Opportunities
The stock market is quite literally on discount right now. When a stock is trading at a low dollar value is the absolute best time to buy. We encourage you to continue investing. We encourage our clients to implement a strategy called “dollar-cost averaging.” Put simply, small consistent contributions to an investment will far outweigh sporadic large contributions. So continue or even start investing if you have the funds to do so. It’s also a pretty good idea to increase the frequency or amount of your investments during this time. And whatever you do, do not try to time the market. That rarely ends up well.
There Is Hope
Last but not least, we want you to know that no matter how much fear is put out through the media, this upcoming recession will end at some point. And the beauty of being a business owner or entrepreneur is that you have the ability to control your income. So get out there and sign up a few new clients or sell some more products. Then use that money to execute the tips we outlined above!
Check out our FREE Wealth Resources Page by clicking the button below. It’s full of videos and tools about everything from tax strategies and Profit First cash flow management to bookkeeping and marketing tracking. You can still save tons of money and grow your wealth.
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