Tips for how to protect your career, income, investments, savings and credit in the event of an economic downturn.

Economists are warning of a 2020 recession. This post will help you prepare for a higher chance of unemployment, investment losses and general financial instability.

First: What is a recession?

A recession is a downturn in the economy. On a broader scale, this means that businesses lose money and industry produces less product for two quarters — or six months — in a row.

What does a recession mean for everyday people? Recessions are typically marked by higher unemployment rate, wages that do not go up, decreased housing prices, and downturn in stock market equities and other investments.

Is a recession coming?

While economists around the world have been predicting a recession for several years (historically, the economy dips about every 10 years), the virus outbreak and related global stockmarket plummets have experts anticipating recessions in the United States and around the globe happening in 2020.

On March 12, 2020, leading economists warned that stockmarket plunges were the beginning of long-term economic recession.

“We are going into a global recession. The economic damage is going to last.” 

Mohamed Aly El-Erian, chief economic adviser at Allianz, the corporate parent of PIMCO where he served as CEO. CNBC

Reuters News even suggested we may be headed for a depression.

How to prepare for a recession

Thankfully, you are not alone in a recession. Also: recessions are nothing new. Humans have survived recessions since the dawn of humanity, when our ancestors survived droughts and famines — not to mention the 2008 housing crisis.

Taking these practical steps today will protect you and your family if and when the economy takes a turn for the worse (pro tip: the economy ALWAYS eventually takes a turn for the worst, so these tips are best heeded all year, every year):

1. Create a financial plan

One of the biggest mistakes people make when planning for — or in the middle of — a tough financial time, is to sink into a poverty mentality and lose sight of the big picture: Your big goals, and long-term financial plan.

What is a financial plan?

A financial plan is simply a roadmap for achieving what you want, and outlining the steps you need to take to making your money work to make that happen. A financial plan can include:

  • Pay off debt
  • Emergency savings account
  • Buy a home
  • Retirement
  • Renovate a home
  • Vacations
  • Have a baby
  • Help your kids pay for college
  • Start a business
  • Invest time in a creative pursuit
  • And more! This is your life!

How to make a financial plan

Ellevest is an awesome company solely dedicated to helping women build their financial futures, and close the wealth gap. It was started by an awesome feminist and focuses only on female clients.

Ellevest has a free financial plan template that will help you identify your goals and dreams, and outline the steps you need to take to get there.

Use this link to get your free financial plan from Ellevest >>

2. Live simply

One of the most important tenets of financial security is to live within your means—avoid debt, focus on saving and investing and general financial security. For most people, this means simple living.

What does ‘live simply' mean?

Simple living has untold benefits, including financial, environmental, mental/emotional (the less stuff you have, the less you have to clean, care for), and involves these habits:

  • Minimalist living. This includes owning a home just big enough for you, and your family's needs. Your purchases are aligned with your values, which for most people do not include showing off for your neighbors/Instagram followers!

How to live simply and cheaply

Think carefully about whether your purchases and time spent bring meaning and joy to your life, family or community. Think carefully about the environmental impact of how you spend your time and money. These habits can include cooking at home, stop shopping for fun, drive a reliable car that you can afford easily and gets high gas mileage, and plan vacations that you can afford outright, and with ease. Other tips:

Declutter your home. Getting rid of things you do not want or need not only makes your home nicer to live in, you can sell these things for cash, donate them for tax deductions + good vibes, and reduce the amount of home you need!

In fact, you can declutter every room in your house, then sell stuff like cars, DVDs, video games. Here I explain what to do with unwanted jewelry, including engagement rings, gold and silver.

Best places to sell clothes include local consignment shops, ThredUp online, as well as these places that will give you cash for your unused wedding dress (hey single moms, I'm looking at you!).

Fun fact: Gold prices historically skyrocket during recessions, and today, gold prices are nearing record highs. This means you might consider investing in gold, or, if you need cash, selling any gold jewelry or coins for a tidy profit. The most reputable online gold buyer that I feel comfortable promoting is Express Cash Gold, which has an A+ rating with the Better Business Bureau, and can send you money for your gold jewelry, coins or scrap within 24 hours.

3. Cut expenses

Aside from cooking at home, ceasing all unnecessary shopping, driving an affordable car, and other cost-saving changes, check out bill negotiation services, including TrueBill, which is the key to how to lower your bills FAST.

These services work like this:

  1. Create an account
  2. Connect your bank accounts and/or add a copy of your recurring subscriptions. These apps typically service:
    • Cable
    • Cell plans
    • Gym memberships
    • Internet
    • Phone
    • Alarm
    • Satellite TV and radio
    • Electric / gas /power

I had a great experience with TrueBill, which lowered my monthly ATT&T cell phone bill by $16 while also securing a bigger plan, plus saved me $23.20 each month from my TimeWarner/Spectrum Internet bill.

For this, I was charged 40% of each savings for the first six months, or $6.40 per month for the AT&T bill, and $9.28 for the TimeWarner savings. After that, all savings are free.

TrueBill and other, similar services, also comb your bank accounts for recurring subscriptions, and ask if you would like to cancel them — and offer to cancel them for you, for free. Be honest with yourself: do you really use that gym membership? Are you actually reading the New York Times every day? Did you forget about those subscriptions — or avoided the inevitable pain in the arse of trying to cancel them? TrueBill will do that for you.

Sign up with Truebill for free now>>

While shopping at home, use Wikibuy a Chrome browser extension that follows you around the web as you shop, automatically providing you with coupons and cheaper options for anything you are looking at on Amazon, Walmart.com, Target.com or any other retailer. Get Wikibuy now for free >>

4. Live within a budget

Before you can take any more steps, you need to understand where your money is going from now, and find ways to save money, and stay on track to reach your goals. That means creating a budget.

This is a great guide for how to create a monthly budget that you can stick to through a recession and beyond. One of our favorite tools is MoneyPatrol, a budgeting app that millions of people swear by to help them spend wisely — which usually involves ways to not spend money (15-day free trial).

Then, when you cut all your expenses, you'll need a place where to put money so you don't spend it. In a shoebox in the back of the closet is not a good option — too easy to access, not to mention spend. Which brings us to the next way to recession-proof your money:

5. Save cash

You know you need a savings account for emergencies and peace of mind. $1,000 minimum is great, though three months' living expenses is excellent. Start small by opening a savings account with a high interest rate or money market account with a high interest rate, and grow it with automatic deposits each month.

CIT's money market account is a leader, with an interest rate of 1.8% APR (as of March 9, 2020). Open an account with a high-interest rate with CIT Bank>>

6. Invest in bonds

Bonds are also a great place to park your cash. These are considered very safe investments, which may not get high returns during bull markets, but do typically earn more during than a CD, savings or money market account. Worthy Bonds pays interest rates of 5%, with a $10 minimum. You can also buy bond funds through Ellevest, for very low fees.

Note: This advice does NOT mean you should sell all your stock and move all your long-term investments into bonds. Stay the course. The biggest mistake everyday investors make is to try to time the market — in other words, sell when the market is down, and buy when it is high. There are trillion-dollar computers that struggle to beat the market, so curb your impulse to buy and sell like a day trader.

Instead, keep your investments where they are, slow and steady, and consider bonds to hold your cash for safekeeping + a nice interest rate.

7. Start a side-hustle to make money

If you are worried about being fired or laid off because of a recession or other economic downturn, starting a side hustle or side gig is a great way to earn more money, have some security should you lose your current job, learn new skills, open networking opportunities outside of your current profession— and maybe even start something that turns into a thriving, full-time business.

Even if you don't currently have the skills to do so, there are many affordable and low-cost ways to learn how to be a coder/ programmer, blogger, bookkeeper, grantwriter or virtual assistant.

Thanks to technology and businesses' increasing appreciation for work-at-home employees, are countless opportunities for work-at-home, flexible and remote jobs and careers. Here some more side hustle ideas: 13 work-at-home careers that are great for moms — and how to find them

The first step in building a side gig, or side business, is to create a website or online portfolio. Do not invest a lot of money in hiring a designer. A clean, professional website is a huge asset to landing another full-time, salary position, too.

To start, buy a website name, and secure hosting services, which start at $3.95/month, from BlueHost.

More info on apps and tools for side hustles, including building a site, creating graphics for social media, cloud storage, accounting software, and more.

8. Pay off debt

A common question during tough financial times is: Should I pay off my debt first, or boost my savings account?

The answer is both.

First, make sure you have that $1,000 emergency fund.

Then, as you build a larger nest, work on paying off credit card debt, medical, auto and other loans (and then your student debt and mortgage).

How to pay off debt in 14 easy steps—even on a low income

9. Increase and improve your credit

A great thing to do now, no matter your financial situation, is to increase your credit limit. This gives you a cushion in the event you find yourself in a jam and need to make large charges. Improving your debt-to-credit ratio (the percentage of debt you carry, vs the amount of credit you have) also improves your credit score by showing the credit bureaus that you are responsible with your credit and don't come close to maxing out your cards.

In fact, calling your credit card company and asking for a credit line increase, or opening a new card with a larger credit limit, is one of the best ways to increase your credit score fast.

If you don't yet qualify for a higher credit limit, take steps to improve your credit score. A reputable credit repair company like The Credit People can help remove credit history errors, late payments, identity theft, repossessions, bankruptcies, and other credit challenges that stand between you and a secure financial future. It costs just $9 to get started repairing your credit with The Credit People now >>

10. Do not skimp on important things

Living a financially wise life, and planning for tough times, requires a balancing act between living frugally, and protecting yourself.

It can be tempting to slash things like that extra car insurance, or life insurance, or retirement investments— things you don't need today.

Remember why you invested in those securities in the first place: BECAUSE YOU DO NEED THEM. Your chances of a car accident, untimely death, and old age are equal when you feel broke, as when you feel more abundant. Part of a healthy financial life, is being mentally healthy. Insurance protection is part of peace of mind. Don't under-value your own self-care.

If you're just getting started, educated yourself about the types of investment and retirement accounts, may of which will save you on taxes each year.

If you're already saving for retirement, or investing in the stock market via an IRA, 401(k) or a brokerage account — KEEP IT UP. Not only do you maximize any employer match (a.k.a. free money), but you are in a sweet potion to take advantage of buying stocks and bonds at discounted rates.

And if you don't already have life insurance, or are interested in decreasing your premiums, check out Bestow life insurance, which is backed by major, A+ rated insurers, and offers policies ranging from 2 years to 20 years, with premiums starting at $3/month, and payouts up to $1 million. Best part? Guaranteed no medical exam or lab report.

Get covered in minutes online with Bestow now >>

What happens during a recession?

In general, during a recession there is less economic activity. Typically, the financial pinch follows the following flow when the stock market tanks and home prices dip:

  1. Businesses cut back spending in an effort to increase or maintain profits.
  2. Hiring stops or slows, raises and bonuses are tightened.
  3. Individuals, worried about their jobs and investments, spend less on everything from food, to new homes and cars, and discretionary items like travel, gifts, home furnishings, electronics and clothing.
  4. Governments have less tax revenue to invest in their communities.
  5. The stock market, government debt, and home prices all continue to suffer under these economic pressures.

Positive effects of a recession

A recession is part of a natural, healthy cycle of an economy. Some human behavior shows improvement, including:

  • People tend to save more money during a recession.
  • People shop less during a recession — which is good for the environment.
  • Interest rates are cut, which is great if you need to borrow money, including for a mortgage.
  • Floundering businesses close, which means that stronger businesses are more likely to thrive.
  • There are many financial opportunities from lower prices overall — including the opportunity to buy stocks, real estate and businesses at discounted prices.

How to make a profit in a recession

Buy low, sell high — investing 101. Whether you are in the market to buy a house, or have cash to invest in the stock market, a recession is an excellent opportunity to buy now, and profit later. The key is to hold on to your investment until the market recovers.

How to make money in a recession

1. Buy stocks during a recession.

Most investors get scared when the stock market goes down, and quickly sell. This is 100% the worst thing to do. If you have investments in the market, sit tight. If you have cash on hand, invest now that stocks are at a discount, and profit when the market returns.

Learn about investing in a 401(k), IRA, through a robo-advisor or brokerage: How to get started investing for women, or get started with Ellevest, and use this link to get your free financial plan >>

2. Buy up real estate during a recession.

When the economy is down, home prices drop, and interest rates also go down. This is a great opportunity to buy up real estate — whether for your primary residence, a second, vacation home, rental investment or an Airbnb property.

3. Sell gold during a recession.

Gold prices have historically risen during recessions. Gold has been considered a safe investment, and often climbs when stock markets fall. If you have old gold jewelry, gold coins or other gold items that you no longer enjoy, consider selling them for cash.

Learn more about buying and selling your gold jewelry, coin and other items, as well as today's gold price >>

4. Find home-based work

Whether you are homebound because of a virus outbreak, out of work because of the economy, or simply looking for a second income stream and/or better quality of life, look for a side gig or full-time job that you can do remotely, from home.

Thankfully, these positions are growing in availability, as business appreciate that quality talent might be located far from their headquarters, and it saves companies the cost of renting office space.

FlexJobs is an A+ Better Business Bureau rated online job search site, with a 30-day 100% money-back guarantee, that exclusively lists full-vetted online and remote career-level jobs.

For quick money from side gigs, check out our list of 101 ways to make money right now.

5. Home-based business ideas

There are countless businesses you can do from home — including those that have not been invented yet! What is your idea?

Some ideas to start, where you can earn $100,000 or more:

Best way to prepare for a recession

In short:

Create a financial plan now.

Live frugally always.

Have a nice savings cushion.

Do not when (not if!) the stock market tanks.

Related: How to get your financial act together in 2020 and beyond

About Emma Johnson

Wealthysinglemommy.com founder  Emma Johnson is an award-winning business journalist, activist and author. A former Associated Press reporter and MSN Money columnist, Emma has appeared on CNBC, New York Times, Wall Street Journal, NPR, TIME, The Doctors, MONEY, O, The Oprah Magazine. Winner of Parents magazine’s “Best of the Web” and a New York Observer “Most Eligible New Yorker," her #1 bestseller, The Kickass Single Mom (Penguin), was a New York Post Must Read. A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Emma's Top Single Mom Resources.

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