How to Prepare For a Recession

How to Prepare For a Recession, How to be prepared for the Recession?

There seems to be a growing consensus among the intelligent people I am following right now: Inflation was already high and would intensify as a result of the war. We can easily see 10% inflation this year. How to be prepared for the Recession?

The war will create severe food shortages next year as most agricultural products come from Ukraine and Russia.
The shock of the property was already serious and would be worse. Take a look at the Chinese Covid eruption that is closing in on all cities and the supply chain is in crisis again.
Therefore, the current economic downturn is inevitable.
Last week I even jumped on the band by pointing out that the recession is the only way we have seen inflation in the past.

I believe the chances of a recession are higher now than last month.

However, when confronted with the possibility, you should look at both sides of the conflict. There is no 100% guarantee in the market or in the economy.

Let’s look at the other side of the issue and see what can be done to improve the situation.

There is a tone of pent-up demand.

A Delta official said the airline had recently had two busy days in history regarding the sale. The cost of tourism is currently rising.

I was at Disney last month. The parks were full every day. My Disney insiders told me that they thought that sometime in March they would see the busiest week in all of their theme parks. And I know from experience – Disney is not cheap. Inflation does not stop spending in parks.

The housing market remains very volatile, even in spite of rising mortgage rates. This is not really a recession.

To be honest, these are just anecdotes. What about certain data?

Each quarter, the Federal Reserve issues a report on domestic wealth. Last year there was a sharp increase in household income than ever before:

Total U.S. family income increased by about 19 trillion by 2021. Real estate alone is worth more than $ 5 trillion.

Homes have never been very rich.

So, on the other hand, rising prices can cause consumers to hold their money on certain products and services.

On the other hand, inflation has been more than a trend since last April. Consumers have been saving and paying off debts for two years. It is quite possible that U.S. families will complain about inflation but then go into debt and use savings to cover higher prices.

That may actually expand the expansion. Both of these arguments have their merits. So we could run into a recession this year or next year or four years from now. I really do not know. All I know is that we will have a recession sometime.

Since World War II, we have experienced 13 economic downturns in the United States:

USA Recession

This means that in the last 80 years or so, the recession occurred once every 5.9 years.

Now, the recession does not go by train schedule. Sometimes they occur in rapid succession (as in the 1950s or early 1980s) and sometimes they are few and far between (such as the 1990s or 2010s).

The way I look at it is not about the recession but the recession. There is a difference.

The same is true of the recession.

How do you prepare one? In the same way, you prepare your money for anything else.

Instead of changing your portfolio because you think the recession is coming, create an investment plan that is long enough to cope with a variety of conditions (one of which involves economic access).

Give yourself a safety margin with a high cost of savings and an emergency fund not because it will help you survive the recession but because it will help you survive any number of life curveballs that will definitely throw you off.

Pay your bills on time and create good credit points not because they will help you during the recession but because they will help you whenever you need to borrow money.

Depression often triggers thoughts of a financial crisis and that is something you should be aware of as an investor.

But you may have an easy recession that happens without reaching GDP.

Maybe you lose your job. Perhaps the local economy is in shambles. Maybe you are divorced. You probably get unexpected expenses. Or you may have made a poor investment decision that saw you lose a lot of money even if the markets did well.

Conclusion

The point here is that you are not preparing for the recession by trying to find the exact first and last days of the next GDP decline. Not only is this impossible to do in conjunction, but it probably does not help at all.

You should build resilience in your financial system by understanding that it is a natural extension of the capitalist system in which we operate even if you do not know when it will happen.

Data are from Ben Carlson. Also, many more blogs are there on investments here.


Comments

Leave a Reply

Your email address will not be published. Required fields are marked *