How to Take Advantage of Opportunities in a Recession

Over the last few months, whether via business news sites or otherwise, you’ve probably heard the phrase “U.S Recession” making various headlines as a main topic of discussion.

While the jury is still out about whether the U.S economy is headed for a recession or not, it is becoming increasingly probable that an economic downturn could be coming later this year or early 2023.

Instead of spending time speculating about the possibility of a recession, however, now is the time for us to consider the actionable steps that can be taken, to prepare for the opportunities a recession presents.

If history is any indication, there are some characteristics of post-World War Two recessions that are fairly consistent.

These include: a stock market decline averaging -30%, a decrease in interest rates in the short term and an increase in unemployment.

In order to capitalize on the opportunities a recession presents, here are five ways to prepare for what is likely to come:

  1. Evaluate your finances
    What does your full financial picture, that is, assets, liabilities, income and expenses look like? Is there a need to limit your liabilities and put a cap on your spending and monthly expenditure? With yearly inflation, your money may not go as far as before, so stretch every dollar as much as you can.
  2. Create a Budget
    In preparing for various possibilities and eventualities, it is important to review your essential and nonessential spending. Consider this, if your cash flow were to decline by 20-25%, what subscriptions or expenses could you remove from your budget?
  3. Conserve your resources
    As previously mentioned, one opportunity recessions present is that they create bargains. These bargains may come in different areas such as stocks, real estate, consumer goods, equipment or even business opportunities. Try to build up some cash reserve now, so you are able to take advantage of these opportunities, if and when they present themselves.
  4. Consider holding off on making large purchases
    In the context of a highly probable recession landscape, it would be wise to hold off on making large purchases. This can result in not only saving cash, but also potentially positioning you for a better deal later.
  5. Advance your skill set
    Company layoffs are pretty common in a recession environment so do what you can to ensure it’s not you. Consider new ways to make yourself more valuable to the company and work to improve your knowledge base within that particular area.

Whether we like it or not, recessions are a natural part of the economy. Whenever we see them headed our way, one of the best things we can do is accept it and be proactive about doing what we can to prepare.

Analyzing your finances, creating a lean budget, conserving your resources, holding off on large purchases and improving your skillset are all actions, that offer long term benefits in good times and bad.

Stay ready so you don’t have to get ready.