Lots of big things are happening across the world these days. From Brexit in the UK, to divided politics in the USA, there’s a lot of unknowns that are difficult to prepare for. One unknown that can completely change anyone’s life for the worst, is a recession. This article isn’t going to try to predict the next recession, or pretend we have inside information about one, but to instead provide you with real tips for preparing for a recession as an individual or a business.
All the financial planning in the world is great, but it can’t stop a recession. What it can do, however, is give you enough financial advice to have a plan in place in the event of a recession. While it might be impossible to not take at least a little hit on your finances during a recession, there are ways to pad yourself so the hit isn’t so bad. Let’s first look at ways you as an individual can prepare.
As an Individual
1. Use a tax consultant
Taxation consultants are a great way to make sure you’re paying the right amount of taxes and getting any money back that you’re meant to. Tax professionals will have a deep knowledge of the laws and exactly how and if you need to file each year, saving you the most money.
2. Beef up your savings
Possibly the best thing you can do to make it through a recession smoothly is by having a strong savings built up before it even starts. Start saving as soon as you’re able to, and try and have at least a six month cushion saved, which means you’d have enough to live and pay your bills for a full six months. Even in the case of a redundancy where you may be entitled to redundancy pay, it’s still vital you have that savings as a backup, as it may take you extra long to find another job during a recession.
3. Consider insurance
Insurance is a tricky one when it comes to recession. If you’re trying to buy up a bunch of car insurance, life or even income insurance during or right before a recession, there’s always risk of insurance fraud or scams you’ll have to look out for. There’s also a chance that in a bad recession, you might not be able to get a policy at all. Income protection insurance is possibly a good option for you if you think your job could be at risk during a recession. This policy will cover you if you lose your job or become sick or injured, and can help you pay your bills and living expenses while you’re out of work. This can be a lifesaver during a recession, and especially if you don’t have a good savings built up.
4. Diversify yourself
We’ve all heard of diversifying our assets to reduce our risk, but it’s just as important to make sure that you and your career is diversified. Backing yourself into a career corner might be fine when times are good, but in the event of a recession and redundancies, that extremely niche knowledge and experience will make it hard for you to find another job. Take any learning opportunities you can at your current job, and make sure to keep a list of them somewhere safe. That way you can refer back to what you’ve learned, use any courses or workshops on your CV, and potentially learn new skills that would apply to another job.
As a Business
1. Liability insurance
General liability insurance is something you want to make sure your company has now, before a recession hits. If your business is hit with a liability claim due to your company’s negligence or bad service, you could run your business into the ground without insurance during a recession. Protect you and any workers you have against accidents, injuries, and faulty service or products with liability insurance as soon as possible.
2. Be smart with taxes
Just as it’s important to pay attention to taxes as an individual, it’s almost more important as a business. Make sure you have an accountant you can trust to manage your company’s finances. A good accountant will be able to spot any small issues before they become bigger, and have more knowhow in the event of a recession.
3. Be prepared to reduce prices
The fact is that in a recession, people aren’t going to be able to afford as much as they used to. If you are a service or product based company, you’ll need to be prepared to slash prices to keep your customers through the recession. You’ll find that you keep loyal customers this way, and ones that will stick with you even after the recession ends.
4. Amp up your marketing
It might sound backwards to spend more money on marketing when you already have less, but now is a great time to pick up new customers. Many people during a recession will feel like they need to change their spending or change where they keep their money. Keep your marketing plan alive and well so that you can pull in antsy new customers with your reduced prices and strong branding. This way you’ll come out the other side of a recession with a wider customer base.
We know, the word recession sounds really scary, and can mean big issues for you as an individual and the company you work for, or the business you own. But one of the most important things to keep in mind during a hard time is to remember that the future won’t always look like this. Market swings are common, and recessions are actually a normal part of the business cycle. Take some of these pointers to heart, and look towards the future for stronger and more recession hardy accounts.