First things first, what do you understand by an “economic downturn”?
Probably you are pretty close to Investopedia’s definition: a period of declining economic performance across an entire economy that lasts for several months.
Are we in an economic downturn?
No, we are not. Yet. Maybe. With inflation high, raising interest rates, and bear stock markets, an economic downturn or recession is a very real possibility. But don’t panic, economic downturns are natural and help achieve balance.
As our economic environment changes, our financial goals, budgets, and approach to money must be updated. This doesn’t mean that we all need to just stop spending money, but instead, our money must be spent according to our goals.
Dos
- Review your financial goals. As the economy changes, old opportunities become not such a good idea, and new opportunities arise. Have you been looking at buying a property but the recent inflated prices put you off? An economic downturn scares people and can decrease demand in the housing market. It also balances the cost of borrowing money. Time to look at it again, or for the first time!
- Budget, budget for everything. For the year, for the month, for the weekly petrol expenses, for your gym and Netflix subscription, for that upcoming holiday. Budgeting helps you tell your money where to go instead of wonder where it went.
- Create an emergency fund. The very basics of financial wellbeing is to have an emergency fund that can get your expenses and lifestyle covered for 3 to 6 months. Do you already have one? Think about the next powerful step: a f*ck it fund. The one that will get you walking out the door confidently when respect and growth is not served on the table any more.
Don’ts
- Sell your financial assets emotionally. You’ll be bombed with news of companies laying off half their workforce, and stocks markets crashing. Your first reaction will be to panic and then sell, and if you do it, you will be selling emotionally. Take a day to research about your portfolio companies’ action plan, then make an informed decision.
- Overspend. When money is flowing, a few $ more or less doesn’t really matter. Well, time to look after those extra bucks. When planning for your holiday, check flights from/to different airports. When shopping online, buy through cashback websites. Check your bank account periodically, have you been overcharged? Do you have any useless subscriptions? As if your money is worth.
- Stop investing. If you have built the grounds to invest in times of financial growth, why stop now? In fact, your favourite stocks are most probably on sale now. In your next financial date, look for safer investments, specially those where you can take your money out at any time without withdrawal penalties.
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