Last Updated on June 29, 2022 by Alex
If you don’t prepare for the coming recession there’s a good chance it’s going to crash over you like a giant wave.
Especially if you are young, you should prepare for the coming recession because as one of the last ones into the workforce you’re most likely to be one of the first ones out when layoffs come. Don’t wait until that dreaded call into the boss’s office.
Despite a record number of job openings in the economy, layoffs have already begun, with crypto-related companies leading the way, but others like Tesla, Warner Brothers and Netflix are also starting to let employees go.
That said, here are top 9 things you can do right now to brace for the risks that a recession brings.
1. Secure Your Job Before the Recession
Now is the time to become indispensable at your job if you aren’t already. Becoming indispensable may entail finding ways of making your boss’s job easier, and becoming the most prepared and reliable person in the office. Take on new projects, come early and stay late, show commitment to the company and become the person both colleagues and bosses rely on to complete projects. If this is impossible in your job, now may be the time to find a more suitable position. Jobs are still plentiful although layoffs in some sectors have begun. Position yourself right away for the time when the squeeze on the larger labor market begins.
2. Prepare for the Recession by Building a Side Business
As I’ve written about before, one of my favorite businesses of all time was as a self-employed house painter after college. I made more money than in the first years of professional jobs later on after graduate school. Whether you can paint houses, repair motors, do yard work or any number of other manual jobs, having a small offline business that you can run on weekends and other free days can be both lucrative and rewarding.
Needless to say, most people starting a small business these days go online. The options here are many. You can start an Etsy shop, start a blog, start a dropshipping business, become a ghost writer. Sites like Fivrr and Upwork feature many freelance writing opportunities for everything from technical writing requiring engineering knowledge to writing blog posts. If you are a good writer there is definitely something available in your niche.
3. Use Your Home and Car to Become Recession Proof
Is your house or apartment suitable for listing on AirBnB? Can you rent out a room on a permanent basis? Do you have a basement that you can finish converting into a small apartment that you could rent? If you have space in your garage you can rent it out to people who would like to protect their small boats or motorcycles over the winter months. You can also rent out space for events and become a small farmer’s market gardener if you have a yard that is big enough to plant vegetables in.
Your car could be an asset as well. Of course you can drive for Uber or Lyft or a local alternative. You could also deliver food for DoorDash, Uber Eats, Grubhub or another company. Postmates, Instacart, Shipt, and Amazon Flex may all hire you to deliver other goods. You can also rent your car out when you aren’t using through Hyrecar, Turo, or Getaround. Through Taskrabbit you can become a Tasker who helps people move, assembles furniture and does other manual work. If you own a pickup or other large vehicle that would be especially useful to people needing large pieces of furniture moved.
4. Learn to Short the Market
The average retail investor never takes out a short position and thereby not only misses out on gains but sustains more painful losses than necessary when, like now, the market turns bearish. An hour or two learning how to short the market would be time well spent. There are any number of ways to short the market, but my favorite is to buy inverse ETFs. An inverse ETF like SPXS is a triple leveraged ETF that is inverse to the S&P 500. So for every percentage drop of the S&P SPXS will gain 3%, and vice versa. It’s risky and you don’t have to take out a leveraged position to short the market. Whether you the short is your only position or you take it out as a hedge and keep your other long positions, shorting when the market is in bear territory is smart and profitable. Remember to either take out your short position or add to it on big green days, which there will always be some of, even in bear markets.
5. Prepare to Dollar Cost Average into Great Companies
Dollar cost averaging is when you invest a consistent amount of money in the same security at set intervals. So let’s say you buy $100 of Bitcoin every Monday, or on the first of the month—any interval up to a month will do. This reduces the risk and smooths out your average price, and in a recession and bear market ensures that you capture some part of the value on the way down and end up with a reasonable average price. As we go towards a recession and the stock market is still over-valued, this strategy may be worth delaying until until the S&P 500 has pulled back at least 30% and the forward p/e ratio has come down from a still frothy 22 to at least 15. In other words, as of this writing, expect further pullbacks and start scooping up cheap stocks only later when they’re even more of a bargain. On the other hand, if you are comfortable being in the red before going green then DCAing now into great companies on which you have done your due diligence research is a good idea, even now, so long as the investment schedule is sustainable. In the longer run the American economy is still the strongest and most dynamic in the world.
6. Learn a New Marketable Skill
One of the best ways to prepare for the coming recession is to learn new marketable skills. A favorite of mine is becoming a certified personal trainer. There are good certification programs out there that you can do completely online at a reasonable cost. Once you are certified not only can you take personal clients but you can start a fitness blog or create online courses.
Other marketable skills you can easily learn are building WordPress websites, Pinterest marketing, Facebook ad management, content marketing, SEO, copywriting and video marketing. You could learn Photoshop or how to make YouTube videos.
Skillshare is a great and inexpensive way to take online courses in any number of areas to increase the number of marketable skills you are competent at. With over 40,000 courses, Skillshare has got something for everyone who wants to learn a new skill or improve one they already have.
7. Save on Expenses
Increasing cash flow is one side of the equation. Cutting expenses is the other and arguably one of the most important things you can do now to prepare for the coming recession because it will instill better spending habits.
Start with a subscription audit. You might be surprised to find you’ve got subscriptions you have forgotten about, and you might be surprised to see how much your monthly subscriptions add up to. Consider each carefully. Cut as many as possible. And that Netflix subscription that you just can’t live without, alongside Amazon Prime? Deactivate it and see how you do for a month. Then reconsider.
Sometimes we nickel and dime ourselves to death, like with too many subscriptions and with consumer crap we don’t need or care about. And sometimes we ruin our budgets with outsized big ticket expenses such as resort holidays or new cars. Look into the next year and examine the big expenses you have planned, if any. Cutting or downsizing those may do more for your financial security than any other move you make.
Finally, most people and families can save a lot of money by cutting out, or cutting down, restaurant expenses and grocery bills.
Food that is cooked at home is healthier and in most cases tastes better than what most people get in restaurants, where food is typically loaded with salt, oil and/or sugar to make it more palatable. Which is also the food that makes you fat and sick and sends you to an early grave. Cut it down to the bare minimum.
As for groceries, anything that comes in a box or a can and has a list of ingredients is processed food that is good for neither your pocketbook nor your health. Consider what life would be like if you shopped just the outside aisles of the grocery store, buying fresh fruits and vegetables, bulk beans and grains, and fresh meats in moderate amounts. Cooking from scratch at home can improve every aspect of life, including your family relationships, budget and health.
Finally, how much money can you save and even make by developing your couponing skills? A lot. If you put in a little effort you will come across opportunities not only to save on products you normally buy but also to scoop up large amounts of products for resale for nearly free or even free when stores get rid of inventory.
8. Pay Down Debt
There isn’t much to say here. Just do it. Get rid of credit card debt first. Debt will be an albatross around your neck if it isn’t already, so make this a top priority.
It’s a good idea to develop a debt repayment strategy-one that you commit to paper, print out and regularly review. It should list all of your debts by type (more on that in a second), interest rate and starting amounts.
Types of debt include secured (collateralized) and unsecured debt, as well as installment loans (student loans, mortgages, car loans, personal loans) and revolving debt (credit cards, overdraft or personal lines of credit).
What strategy to use depends on what kinds of debt you are carrying. It’s a good idea to pay down secured debt first though of course that doesn’t apply to mortgages.
Approaches you might want to consider:
- Focus on paying off the highest interest rate debt first, while paying minimum balances on all other debts and then once the first loan is paid off apply the same method to the next highest interest rate loan.
- Pay off the smallest loans first, moving to the next smallest and so on.
- Pay off the debt that causes you the most anxiety first. For me that’s always credit card debt but for you it might be your car loan or your student loans. Get some peace of mind by getting rid of that one first.
Whichever approach you use, build your strategy and a timeline around that. A debt repayment strategy might also motivate you to figure out ways to make some fast money that you can throw at your loans. As you see your strategy being implemented your morale will go up and you’ll be even more incentivized to be creative in making money.
9. Buy and Sell
Buying and reselling products is a great way to make money. You can start a reselling business on eBay, but other options include Facebook, Etsy, Mercari, ThredUp and Poshmark. If you are into clothes and like to go thrifting, consider opening a Depop store. Successful Depop stores have turned into careers for top sellers.
Whatever the product, reselling is a great way to make money, and with so many platforms out there on which you can resell products it’s a business that has excellent long term growth potential.
Prepare for Recession Now Before It’s Critical
Just going through the motions of your life waiting for the recession to hit is like sauntering along a sunny beach while a tidal wave two miles out at sea is moving towards you. You’re just asking to be engulfed.
The time to act is before the recession, not when it’s gotten going. The signs are all there now. The stock market is in bear market territory, the Federal Reserve is hiking interest rates and selling off assets, companies are starting to lay off in some industries, and inflation is rampant, which will lead to further Fed interest rate increases and well as some reduction in consumer spending.
Recessions are tough but most people don’t do nearly enough to prepare for them. Ideally you want to be debt free with a decent amount of savings and multiple income streams in addition to your regular job.
Prepare for the coming recession and make yourself as resilient as possible. You won’t regret it.