A recession is a guaranteed part of any economic cycle, and no one is immune from the financial impacts that these cycles can cause. When an economy (domestic or global) is considered “in recession,” it is economically contracting, so to speak. Companies offer fewer new jobs, government agencies slow spending, and little-to-no financial growth (if any) is recorded during these economic downturns.
Many middle and lower-class families are the hardest hit by these stressful periods, but how can you be prepared for such an event? Here are 3 proven ways to maintain value in your hard-earned money when enduring a recession.
Invest: Consumer Goods (Think Household Necessities)
While many consumers may cut back on spending in entertainment, travel, and other areas of extra spending, there are several commodities that have historically endured recessionary periods: household commodities (think groceries, cleaning products, toiletries, etc.) As people spend less-and-less dining outside of their own kitchens, their grocery bills will likely go up, and so will the producing company’s stock prices. Investing in these stock sectors is a much more promising venture than other areas of the stock market that historically prove more vulnerable to the wrath of a recession.
Invest: Bonds
In times of a recession plus high inflation, there’s no clear way to make a lot of money, but with bonds, there are ways to save it. As inflation soars and the value of the American dollar bill diminishes, one way to retain the value of your investment is a government bond. These bonds’ average annual returns aren’t much when the stock market soars, but they prove to be stable, valuable investments during times of economic uncertainty, such as a recession.
Save: Aim for 15-20% Monthly
One of the biggest rules from billionaires and financially successful people? Pay yourself first. Before investing and frivolous spending, pay yourself first. This helps to ensure you and your family depend less on credit and loans of all types, which can come with hefty price tags and even more dire financial consequences during a recession.
During stringent times, aim for 15 to 20 percent of your household income. When the rough waters of that economic storm settle, you can adjust your liquid savings rate to 10 to 15 percent of your total household income. You’ll be thankful you did this later when those waters get rough again.
While there are no certainties during times of global economic recession, it’s best to look to history and find some guidance for the present. If you work to maximize the value of your dollar when each dollar comes in less frequently, then it is much easier to weather the storm.
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