2020 is shaping up to be quite the year. A world-wide pandemic of Coronavirus has hobbled industries, jobs and even entire countries. It’s safe to say that the economic impact of shutting down such large segments of the world’s economies will long-term lasting effects on the entire population. And while no one knows how long the coming recession will last, most economists agree that it will take years to recover. But as long as you’re smart about it, you can weather the storm and come out of these trying economic times (relativity) unscathed. So, today we are going to give you ten practical tips on how to survive the recession of 2020.
How to Survive a Recession in 2020: 10 Practical Tips
- Keep calm. – Recessions and economic downturns have been with us since that beginning of human civilization. While they aren’t pleasant, they also don’t last forever. One of the worst things that you can do is to make long-term decisions based on short-term predictions. In other words, unless you need the money to live on, now is not the time to be selling assets. Real estate, stocks, collectables, and other assets may be losing value, but unless you are desperate for money it’s almost always better to hold on to them if you can.
- Do sell expenses! – Just as we don’t recommend selling assets in an economic downturn, we do recommend selling assets that cost you money, otherwise known as expenses. What kind of expenses should you sell? Things like extra cars, boats, jet skis, airplanes, ATV’s and other ‘toys” you might have accumulated over the years. These things, while they may give you pleasure will only drain your bank account. Besides, at the time of this writing, unemployment was at 14.7%. If your job is on the line, you don’t need to worry about maintenance, storage, insurance and other fees associated with these items.
- Eliminate as much debt as possible. – Having debt even in good times can be problematic. In a recession it can be especially difficult. Hopefully, selling off your assets that cost you money (i.e. Expenses), will leave you with at least a manageable amount of debt. If you still find yourself with too much debt for your income, try adding another source of income. More on that later.
- Pay cash for everything! – In bad economic times the phrase “Cash is king” really applies. Besides not adding to your debt load, paying for things with cash and avoiding credit cards has additional benefits like; Making you think twice before making purchases that you may not need. Giving you that extra incentive to find the best deals on your purchases and getting discounts and bargains only available cash buyers.
- Understand the difference between wants and needs. – Put simply, you may “need” your morning coffee, but you only “want” Starbucks. There are a lot of these little things that we do over the course of a day that if we took the time to stop and think about, we’d realize were not “needs”. The candy bar at the gas station, the magazine at the grocery checkout, the “super-size” upgrade at the fast food place.
- Update your job skills and resume. – Learning how to survive a recession is really all about being prepared. So, even if you aren’t worried about your job it’s always a good idea to update your resume just in case. Now is also a good time to finish up that degree or professional training program you’ve been working on. And don’t forget about LinkedIn, make sure your profile is updated and stay in touch with your connections, you never know when you might need them.
- Consider adding an additional source if income. – Cutbacks and layoffs are all part of a recession. But with the rise of the internet, ecommerce and the gig economy, there are now more options than ever for people to make extra money. In the past, delivering pizzas on the weekend was always popular. Now, you can drive for Uber, Lyft, DoorDash, Amazon, Postmates and many more. Two other very popular ways people make extra money is through blogging and/or affiliate marketing. Neither of these cost much to start and can be done at home in your spare time. In fact, one of the biggest niches for women is starting a mommy blog.
- Look for ways to barter. – Bartering use to be a way of life in the U.S. Even though people had money, bartering was a way to conserve that money for other things. So if you farmed corn, you could trade some of that corn for your neighbor’s eggs. Now, most people aren’t farmers or raise their own eggs, but most of us do have skills that are valuable. For instance, maybe you know how to change the oil in your neighbor’s car and he knows how to fix your plumbing leak. Or you can tutor the kid down the street in return for babysitting. Bartering is a great way to get both wants and needs met without spending a lot of money.
- Don’t forget the “B” word. – It always amazes me how few people take the time to make a budget. There’s an old saying that “people don’t plan to fail, they fail to plan”. Having a budget is always a smart thing, but in tough economic times it can be a lifesaver. It doesn’t have to be a hard or harsh thing, in fact just Google “how to make a budget” and you’ll get thousands of good, free results. I think that a lot of people don’t want to deal with budgets because it feels limiting. Like you have to account for every last dime you spend, and that’s no fun for anyone. But you can get around that easily. First of all, your budget should include some “just for fun” spending. Date nights or family outings should be part of your budget, as well as a certain amount of spending money that doesn’t have to be accounted for. There is lots of help out there for starting a budget, so don’t put it off.
- Get rid of high interest credit card debt. – Credit card debt is a killer. If you can’t pay it off, consider transferring the debt to a credit card offering a 0% introductory rate. If that’s not possible, then concentrate on paying off the credit card with the highest interest rate first, then move to the one with the second highest interest rate and so on.
How to Survive a Recession in 2020: What Not to Do!
We’ve talked a lot about how to survive a recession and the proactive things you can do to help you survive. But as is often the case, knowing what not to do is just as important as knowing what to do.
Don’t stop saving.
First, don’t stop saving for retirement. It’s tempting to cut out savings and investments when things get tough. After all, your income is down, and your investments are declining. Don’t give in to this temptation! Historically, funds invested in the stock market have risen 10% per year over the long term. If you continue to invest in the market during a recession, you are essentially buying assets at a discount. So, the actual returns you’ll see on the purchases made during this difficult time will be some of the best returns you’ll ever get. On the flip side of that, if you sell these assets, all you are doing is locking in a loss that you’ll never get back.
Don’t discount the small steps.
It’s tempting for people to justify their own behavior. Deciding to buy that extra Starbucks coffee is okay because $5.00 isn’t going to make or break you. Or, deciding not to take that side job on the weekends because it only pays $100 and your time is worth more than that. These are all ways that we justify bad decisions. Yes, $5.00 isn’t going to put you in the poor house and $100 isn’t going to be a down payment on a second home. But, an extra $420 per month (Weekend job pays $400 and one less Starbucks per week = $20) is enough to cover a car payment or utility bill.
Don’t buy expenses.
Sales people will often times try to sell expenses disguised as “investments”. Things like timeshares are often sold as a way to save money in the long-term on vacations, or as an asset that can be passed down to your children. In reality, buying a timeshare is just an expense. They will charge you an annual maintenance fee (that increases EVERY year) and they become virtually worthless the minute you buy one. Sure, you can pass it on to your kids, but why would they want something that costs thousands per year and is virtually worthless if they tried to sell it. Stay away “investments” like these, even in good times.
Don’t forget David’s rule!
Unfortunately, hucksters and scam artists come out of the woodwork during hard economic times. They prey on people’s weaknesses and vulnerabilities, often by promising solutions to common problems. Did you lose your job? Here’s an easy way to make money. Have bad credit? Don’t worry, we can fix your credit so you can get a loan. Have a timeshare you can no longer afford? We have buyers ready to take it off your hands. And these are just a few, there are a lot of ways people will try to scam you.
But you can avoid falling for these scams if you follow “David’s Rule”, which states “If a company requires an up-front fee in order to help you, walk away it’s probably a scam”. While I can’t say that this rule holds up 100% of the time, it does hold up 95% of the time. Think about it, no legitimate company charges people up-front fees. If you get a massage, haircut or even an oil change, you pay once the job is complete and you are satisfied.
You don’t pay the realtor if they don’t sell your house, and timeshares are much less expensive than homes. This rule also applies to income opportunities too. Legitimate employers never charge you a fee to sell their products or to work for them. And I’m sorry, but this also applies to your uncle Harry selling dietary supplements for an MLM. He may not be intentionally scamming you, but statistics show that there is a 99% failure rate for those who join MLM’s.
Don’t neglect the important things.
Life is full of hardship and sometimes it’s hard to see the silver lining through the storm clouds. Be sure to take the time and effort needed to appreciate and nurture the things that are really important in life.
Your health – With all of the uncertainty involved in a recession, increased stress is normal. Now is not the time to miss doctor’s appointments or give up on diet and exercise. You may think that you are too busy for those things, but just think how much further behind you would be if you landed in the hospital.
Your spouse – Oh yeah, that person you pledged to spend the rest of your life with, through better or worse, sickness and health, your partner in life. If you’re not taking time to nurture that relationship, then you may find yourself without work, without income and without a partner. The stress of a recession is bad enough, don’t compound it.
Your friends and family – It may sound cliché, but true wealth come from the relationships you have in your life. John Paul Getty, the richest man in the world in his time died a miserable old man who had alienated himself from his family and could never trust his “friends”.
How to Survive a Recession in 2020:
Conclusion
In an ancient myth, King Solomon asks for a ring to be made that will keep him humble when things are going well and lift his spirits when things are going poorly. After searching for magic to put into the ring and finding none, he was finally presented with a gold ring inscribed with “And This Too Shall Pass”.
Economies are cyclical by nature. Neither good times nor bad times last forever. Wise people recognize this and while no one can predict the timing, they will save for a rainy day when things are good, and adjust priorities when things are bad.
So, take the long-term view and change the question from “how to survive a recession” into the statement “when I survive the recession”. After all, This Too Shall Pass.
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