I saw something really scary this morning. Scary enough that I rearranged my jobs for the week, and decided to write an article on how to prepare for a recession.
I shall show you the scary thing I saw in a moment. I will also provide some great tips on how to prepare for a recession – both personally, and if you run a business. But first, let’s have some background:
I’ve run my own businesses since 2004, and grew up in an entrepreneurial family. As well as steering my own business through the global financial crisis that began in 2008, I’m also old enough to remember the recession of the early 1990s, and the stress and fallout it caused – not just for my family, but for millions of others.
What is a Recession?
The technical description of a recession is when a specific country’s economy (GDP) contracts for two successive quarters.
In the real world, a recession is a time when lots of people lose their jobs, businesses struggle and go under, and everything gets rather grim and difficult for many people.
Is a Recession on the Way?
I hate to sound like a doomsayer, but it’s impossible to ignore the signs that the world may be heading for its next recession. The Guardian recently published an article listing seven compelling reasons why we could be heading for rocky financial times.
Last month GQ reported on a survey of 226 economists; 38% predicted a recession in the US in 2020, and 34% predicted one biting in 2021. That leaves depressingly few who don’t seem to think a recession is on its way.
On a more personal level, I’ve seen some (rather more subjective) signs that concern me. Businesses seem slower to make decisions at the moment, and while it’s certainly early days, the usual “post summer” uplift seems distinctly muted this year. Obviously I’m in a position where I talk to lots of business owners, so I know that it’s not just me thinking this.
Here are a few things I’ve heard anecdotally recently:
- “There are still plenty of people coming into my shop, but they’re not buying anything – and other people in the area are saying the same.”
- “There’s so little happening, some days I wonder if my email’s stopped working.”
- “I’m finding my clients are much slower to make decisions on hiring people at the moment. I’ve lost 50k in fees so far this year, and have the same again “on hold” – all because of a lack of decisions. Global tariff wars and Brexit are huge contributing factors.”
All of these things have set my “Spidey-sense” tingling, but what I saw this morning really worried me.
A Big Sign that the Public are Worried About Recession
With all the above in mind, this morning I thought about writing an article on how to prepare for recession. I fired up KWFinder, my usual keyword research tool, and started playing around with title ideas.
What I saw was – I must admit – rather chilling:
By means of a quick explanation, the graph above shows how many people type “how to prepare for recession” into Google each month. As you can clearly see, there was a HUGE spike in August 2019.
Let’s put that in true perspective: In August 2019, 27,000 people searched Google for that particular recession search term. By contrast, a year before, the monthly search volume was just 2,100. This indicates that the number of people worried about a recession has risen by over 1000%.
The same trend was apparent on various other recession-related terms.
Obviously some of this is driven by the media reports referenced above, but the unavoidable fact is that people seem really worried.
Is Recession a Self-Fulfilling Prophecy?
As a businessperson, I’m almost reluctant to even discuss the prospect of recession, because this is what I believe happens:
After thinking this (and building the pretty chart), I did some research and found it’s not just my instinct that tells me it’s the case. PhD social psychologists believe that “apprehension” can be “enough to push (a) country into recession.”
It’s scary stuff, but instead of wallowing in worry, let’s what we can do to prepare.
How to Prepare for a Recession: 10 Steps
Next, we have ten steps to help you prepare for recession. As well as getting you ready for a downturn, these also address how doing the wrong thing can contribute to this self-fulfilling prophecy we discussed above.
Some of the tips lean more towards home life, others more towards work and business. Together they should add up to a situation where recession disrupts your life as little as possible.
1. Prepare but don’t Panic
If you think tough times are ahead, it obviously makes sense to prepare, and several of the other tips in this article give specific suggestions for that.
But flying into a blind panic doesn’t help anybody. If you’ve still got your health / job / business (or even just one of those), then you can still keep moving forward. Don’t allow yourself to grind to a halt because you’re concerned the economy might!
2. Don’t Stop Spending Completely
Saving money and being careful about spending is certainly wise when a recession could be around the corner. However, it’s easy to go overboard and decide the “safest” thing to do is to just stop spending altogether. This applies both to personal spending and business spending. It might be a “safe” strategy, but it’s not necessarily wise.
As an example, it’s easy to get into a mindset where you think the best way to prepare is not to invest in anything for your business – no new tools or software, for example, or no paid promotion.
In actual fact, putting a bit of money IN might be exactly what you need to do. Obviously it’s important to be careful, and it’s probably not the time for a flashy new company car or office. However, a well-considered advertising campaign or a product that will streamline your work in the long term could still make really good sense. If you make a conscious decision to do nothing more than tread water, you’re essentially forcing a constraint on how much you can move forward.
Similarly, on a personal level, the sun will still rise and fall every day, and you will have to get on with it – whatever happens to the economy. Cut back, yes, but cut back on the right things. Healthy food is important, and exercise and wellbeing are important. Continue to invest on yourself, and on your family’s happiness, because that becomes even more important if you have to endure hardship.
If everyone stops spending completely, a recession is certain. Be careful, yes, but don’t contribute to that self-fulfilling prophecy.
3. Kick New Projects Off
On a similar note, just because there’s a recession coming, it doesn’t mean you should press the pause button on your new craft business, your new blog, or that training course you were intending to complete.
In fact, if anything there’s all the more reason to double down on your effort. Certain things are really handy to have in a recession, and new skills and income streams DEFINITELY make the list.
4. Up your Side Gig Game
Side gigs are a massive lifeline during tough economic times. I can personally remember many occasions over the years when little income boosts from things like surveys, mystery shopping and user testing have made the difference between a really tough week and one where there’s still enough for a few treats.
5. Cancel Unnecessary Subscriptions
We live in a world of subscriptions – from food boxes to online TV and gaming packages. When you’re working out how to prepare for a recession, it’s time to examine them and trim them down.
I personally take a good look at my subscriptions once or twice a year, and they always build up in between times. I’ll be having a huge “cancelling session” some day soon – not because I’m currently in urgent need of the money, but because I’m increasingly conscious I’m paying monthly for things I never, ever use.
As just one example, I pay the equivalent of over $20 per month for subscriptions to xBox Live and Gamepass, and I haven’t switched my xBox on since before the summer!
It’s amazing how much money you can save when you eliminate unnecessary subscriptions. It’s always good to think about what they cost you annually too; $40 per month doesn’t seem like much, but $480 per year feels quite significant.
One quick thing I would add here: Unless times are really hard, DON’T cancel things you do truly like and enjoy. You’re only preparing for a recession, not punishing yourself for existing and having hobbies!
6. Renegotiate Contracts
While you’re reviewing the things you pay out for monthly, have a look at whether you could save some money by renegotiating contracts or changing suppliers.
There are often considerable savings to be made if you switch utility providers, or move to a different mobile phone contract.
You may also score some unanticipated savings when you start cancelling subscriptions. It’s far from rare to be offered the same thing for far less money when you cancel, and when you do this online, the offers are often automated. When this happens, it’s obviously up to you to decide whether the new offer is compelling enough to stay…
7. Don’t Leave Money (or Savings) on the Table
If you’re preparing for recession, it’s time to start paying attention to offers. It’s easy to ignore supermarket promotions or “spam” emails with special offers when you’re not thinking about money, but it makes sense to be more aware of them when you’re trying to economise.
Similarly, if you’re not a member of a cashback site like Topcashback – make sure you join and start using it. I make literally hundreds of Dollars back every year on purchases I would be making anyway.
8. Don’t be Complacent
It’s sad but true that many people in the world have an “I’m alright, Jack” mindset.
In reality, plenty of people drift through recessions without really noticing anything different. This is entirely down to luck and circumstance. You may have a job that’s simply not affected, or perhaps your business has just scored it’s best ever project, making recession something only other people have to worry about.
Don’t be complacent, however, The knock-on effects can be vast when a recession hits. Freelancers, for example, can be doing perfectly well, then suddenly struggle because one of their clients is directly affected, and starts paying invoices late.
I’m by no means saying that you shouldn’t continue to enjoy your life if you’re fortunate enough to not be personally impacted by a recession. You needn’t be miserable in solidarity with others! However, be mindful that there are many chain reactions in the world, some of which are tricky to predict. Think beyond your current lucrative contract, or “solid” job role – just in case.
9. Stop Wasting Money
I think most people, if they’re honest with themselves, know which things they have a tendency to waste money on.
In this household, takeaway food is a big one. My wife and I are both big foodies, and I cook a huge amount. However, when we are busy and money isn’t an issue, we fall into a trap of daily shopping (complete with impulse purchases), and expensive takeaways.
Personally, I’m also really naughty about buying completely unnecessary throwaway treats for my children.
It’s not that you have to stop eating or buying treats(!) but being more sensible by making small changes can make a huge difference. All I need do is switch to menu planning and online supermarket orders, and I eat better, spend half as much and waste SO much less time prowling the supermarket aisles.
Do some soul searching about where money slips through your fingers, and work to change it.
10. Declutter and Sell
My wife and I love decluttering. However we also have an office in the garden and a huge double garage, so it’s easy to hide and hoard things. When money’s not an issue, there’s just not much incentive to have a clear out.
One great thing to do when you’re preparing for recession is to finally start to clear out those old possessions. It doesn’t matter if you need the money right away – you can save it or use it to clear debt. In our case, we use money we earn from selling clutter as our day-to-day spending money, which means we don’t have to pay ourselves so much.
You can sell almost anything second hand, and we’ve got some great guides on this site:
- Facebook Marketplace – great for clothes, baby stuff, and bulky items that are a pain to post.
- Amazon Marketplace – good for books, DVDs and games.
- eBay – best for electronics, cosmetics, and anything with a fairly set value.
Further Reading and Suggestions
Hopefully the tips above have made you much more aware of how to prepare for a recession. Here are some places to head next:
Quick Sources of Money
Here are a few sites that can help you boost your “side gig” balance:
More Substantial Ideas