Opinion: How to Make the Recession Work for You

Daniella Cressman

Disclaimer: This information is accurate and true to the best of my knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

When you hear the word "recession," a sense of dread may creep over you. Perhaps your friends and family members tend to freak out when they hear the term, and who could blame them? After all, it refers to an economic downturn. That being said, you can actually make a lot of money during this time if you play your cards right. 

During the 2008 recession, there were a lot of individuals who invested when stocks were more affordable, held their earnings, and profited in a big way in the long run. In 2022, you could be one of the people who does the same. 

KEEP A SOLID EMERGENCY FUND

The humble emergency fund is often overlooked: After all, it is rather boring to simply put aside a few hundred—or a few thousand—dollars per month for a rainy day, but this is especially important during a recession: If the stock market isn't doing well and you've lost a lot of money, you'll have your emergency fund to fall back on. 

HOW MUCH SHOULD YOU SAVE? 

The general rule of thumb is to save anywhere from 3-6 months' worth of cash. That being said, freelancers and self-employed individuals should probably save at least a year's worth for basic expenses such as food and rent. 

"Most financial advisors recommend having enough savings to cover three to six months of living expenses. That could be worth revisiting depending on your specific circumstances."
—Michelle Fox 

The exact amount, of course, will vary based on your lifestyle and the cost of living in your area. 

Generally speaking, a minimum $10,000 is ideal for three months of living expenses and $30,000 will likely account for 12 months if push comes to shove. 

INVEST WHILE PRICES ARE LOW 

If it's a bear market, it's actually a great time to buy: You can invest in stocks for a cheaper price than you'd be able to otherwise. 

In the long run, there's a high chance the value of those stocks will go back up, and you will be heavily rewarded for striking gold when the prices were lower than usual. 

HOLD YOUR EARNINGS 

It is all too easy to panic sell, but that's simply not in your best interest. 

Instead, you will want to hold your investments: The stock market offers an annualized average return rate of 10%, meaning that your earnings will likely come out to about 10% of whatever amount you've invested, but this isn't cut and dry—The profit you bring in will vary significantly from year to year. 

In other words, investing in the market and reaping the rewards is a long game—decades long—so holding onto your stocks is almost always the best decision, even if prices are down: They'll probably go back up—eventually—and you'll likely be glad you benefited from waiting things out. 

"Recent market volatility may have you considering cutting back on your 401(k) or getting out of the market. However, it's important to keep your emotions in check and remember that you're in it for the long term." —Michelle Fox

PAY OFF DEBT

If you do have credit card debt or student loan debt, now is the time to pay it off as quickly as possible: You don't want the bills to rack up while you are dealing with an economic downturn, especially when you could be investing that money and making it work for you. 

DIVERSIFY YOUR INCOME STREAMS 

If you are currently working a 9-5, it might be a good time to start freelancing on the side: It's very common for people to get laid off during a recession, so you'll want to have a backup plan, just in case. 

Additionally, it might be a good idea to diversify your income streams: The wealthy have an average of 7 revenue sources, both passive and active. Perhaps you'd like to invest in real estate, wine, NFTs, and more, so that you have consistent earnings every single month. 

REDUCE YOUR EXPENSES 

Regardless of your income, it's essential to keep a budget: Even millionaires can go into massive debt if they don't keep track of their expenses, and having a record of everything will help you allocate a certain amount of money for saving and investing while still being able to enjoy life in the present. 

The best part about keeping a budget is the sense of self-control: You'll likely have greater peace of mind if you understand where every dollar is going! 

The term "recession" is terrifying: It can conjure images of devastation and poverty in our minds, but the biggest returns often come days after a financial crisis, so it's crucial to remain invested. 

Savvy investors can take advantage of the situation at hand and win big in the long run if they don't let their emotions get the best of them! 

Comments / 0

Published by

Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM
7981 followers

More from Daniella Cressman

Comments / 0