The current bull market’s longevity has people worried. It all has to end some time, and some economists are predicting a recession by the end of 2020. Assuming that holds true, that gives you around two years to get your finances in order. What should you be prioritising?
If you have a sound, long-term financial plan in place, then keep it — there’s no reason to upend everything because you’re worried about the economy tanking. And if you’re relatively young, then definitely don’t run away from stocks. Time in the market is important, not timing the market.
But if a recession and its effects on your finances is causing you serious distress, there is one move you can make to help yourself and potentially abate some of the anxiety: Start saving more cash.
How? It doesn’t necessarily mean scaling back your investments (though any money you’ll need in the next three to five years should not be in stocks, anyway), but it means making hard choices about things to cut out in your every day life that you don’t necessarily need.
Eating (and drinking) out less, cancelling your pricey gym and/or pay TV subscription, staying in a less expensive apartment for another year or so, foregoing an upgrade to the newest iPhone when it comes out shortly, and so on. However you can save money in your individual situation, you know better than I do.
All of those small savings can be added to a high-yield savings account, a short-term CD, or used to accelerate debt payoff now. If you choose to focus on debt repayment, that’s one less thing to worry about when things start to go south.
If you don’t have your three-to-six-month-emergency fund squared away, that should be your top priority. Because with a recession comes an increased likelihood of a layoff or decreased hours, depending on your industry.
Something else to consider doing now, before things head south: Making a Plan B. If the absolute worst happened in a year or so and you lost your job, do you have a plan for making quick cash or keeping yourself afloat? It’s times like now, when things seem fairly good, that you should take some time to consider this.
That could mean building up a list of companies or people you could approach if you business starts getting shaky, or reaching out to old work acquaintances to get back on their radar. It could also mean building skills now that you can leverage later.
But most importantly, build up a cash cushion for yourself. The more uncertain your employment (say, you’re a freelancer or work in an unstable industry), the more cash you’ll want on hand.