Between January and mid-October 2022, the S&P 500 index, a securities index made up of 500 of the largest publicly traded U.S. It’s common to see the stock market declining, which provides an opportunity to invest or purchase shares of good companies at a discounted price. The key is to invest with a 10-year outlook.ĭuring recessions, you have access to more assets for less money. 2) Invest in things that increase in value over time.Īs you increase your cash reserves, investing more in assets (things that increase in value), like stocks or real estate, will pay off in the long term. Whether you decide to pick up a part-time job, start a side hustle, or sell used items (books, clothes, jewelry) through second-hand vendors, creating additional revenue will give you something to fall back on in case of a reduction in or loss of your primary income. Pro tip: Finding a second source of income - outside of your day job - will keep you extra prepared. In addition, during recessions, people with access to cash are in a better position to take advantage of investment opportunities that can significantly improve their finances long-term. Building up your emergency fund will prepare you to tackle future expenses that aren’t already a part of your monthly budget, including unplanned costs due to a shortage of cash, a layoff, or other unexpected events like an increase in food or gas prices.Īn emergency fund of six months will help you face potential financial hardships. 1) Reassess your expenses and increase your savings.Īs a first step, take a close at your spending habits and create a plan to increase how much you save. If you want to come out of a recession more financially stable than before, here’s what to do. To answer this question, I spoke to a series of finance experts with experience in this area, including: Marc Russell, a former financial advisor and founder of the financial literacy platform Better Wallet Chloe Daniels, founder of CloBare Money Coach and Attiyah Blair, a multi-millionaire real estate investor who started her journey during the Great Recession. If you know how to prepare yourself, you can (at the least) remain financially stable, and (at the most) use them to gain unique opportunities to build wealth. While recessions are challenging times, they’re also part of the normal business cycle. history, which occurred between February and April 2020, when the global economy ground to a halt as the coronavirus spread around the world. You also just lived through the shortest recession in U.S. Probably the first thing that comes to mind is the Great Recession, which occurred from 2007 to 2009, and was one of the worst financial crises since the Great Depression. This may sound scary, but if you’re reading this, you’ve already lived through at least a few recessions. Unfortunately, these signs are causing more and more economists to predict a recession. Gross Domestic Product ( GDP) decreased for two consecutive quarters, although it increased at an annual rate of 2.6% in the third. Inflation is continuing to soar at 8.2%, reaching its highest increase in 40 years. The National Bureau of Economic Research (NBER) defines a recession as “ a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” The factors the NBER assesses include consumer spending and employment, among others. By now, you may be wondering, is it true? You’ve probably heard that a recession is coming more times than you can count over the past year. There are also tax deductions for owning real estate property, and the possibility to defer tax payments on real estate profits via a 1031 Exchange while continuing to build wealth through real estate.In other accounts, like a Roth IRA and Roth 401k, your investments grow tax-free until retirement. With these accounts, your contributions are deducted from your income to calculate how much you should pay in taxes. Some retirement accounts offer tax benefits, like a 401k, 403B, 457. When it comes to the stock market, for beginners, an index fund - a mutual or exchange-traded fund that tracks a market index such as the S&P 500 or Total Stock Market Index - is likely the best place to start. During recessions, you have access to more assets for less money. Invest in things that increase in value over time. An emergency fund of six months will help you face potential financial hardships.
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