The shock still remains from last week when the UK referendum spelled out the reality of Britain leaving the European Union. The world markets have been through a turbulent time as it is, but experts have now speculated that Brexit may fast forward us all to the next recession much quicker than previously expected.
However, despite all the uncertainty, and not knowing of what’s to come, let’s look at the top 5 ways to prepare for a recession.
How can a recession affect my life?
It doesn’t matter if you are a rich business entrepreneur or a humble minimum wage worker – the recession will reach and affect everyone in some shape or form.
The troubles it can cause:
- Banks stop lending money to both people and businesses – the majority are reliant on loans or mortgages to get by, so a collapse will increase home repossessions and companies going bust.
- Companies are more likely to face bankruptcy or be under pressure to make extreme cuts to survive the financial conditions; this can include redundancies which then causes high unemployment – another factor for an influx of home repossessions and unpaid debt to lenders.
- If there’s a huge hole in the finance industry, then the government may bail out the banks again, which means further austerity and cuts to public services (especially if high unemployment means less tax income from the population).
- Higher property repossessions may mean another housing market crash.
- Those with private pension schemes riding on the stock market may lose their investments.
Why are we going into a recession?
Although Brexit only happened a number of days ago, many reports from economic analysts forecasted uncertainty and a decline in the worlds GDP.
Despite Brexit, the world economy was already in a very delicate state. It was in a very slow economic recovery from the previous recession, and there was still a multitude of setbacks holding it back from reaching prosperity.
The factors include:
- Falling oil prices and the over-pumping of oil by the Middle East and the USA which resulted in job losses and cuts to the oil industry.
- Political instability in Syria, Libya, and other Middle Eastern states.
- USA and Russia going back to cold war style relations whilst imposing trade sanctions on each other.
- China’s economic downturn which caused panic in the markets earlier this year.
Now with the UK out of Europe (or close as), this could be the final blow needed to create an economic disaster globally.
These are what the banks are saying since Brexit:
Bank of America made UK outlook:
“We have no knowledge of what the geographical boundaries of the UK can look like in a few years, and it looks like this uncertainty is going to be there for a while – leading residential and commercial sectors to look elsewhere for opportunities.”
However, they say that the size of the impact yet is still unclear.
“The estimation of 1.5% growth for 2017 is now expected to decrease by 0.2ppts, however, the total consequence will depend on which way the UK exits the union. A tough reaction from Europe can see an increase in trade barriers and more restrictions on access to the single market. If a political contagion causes bond yields to rise (especially in the periphery), then this can have a heavy impact on GDP.”
Is there any reason to panic?
Of course not – where there’s a will there’s a way.
Looking into uncertain times isn’t scaremongering, it is, in fact, taking control and planning ahead for your future. This can fully ensure that preparation is accurate, and you can minimize the upcoming potential damage.
If you were unfortunate enough to live through the last recession, then you may still be licking your scars and wounds. But fear not, as we will now look at the top 5 ways you can live through a recession.
As they say, there’s no such thing as problems, only challenges.
5# Be in a powerful and good state of mind
This is a very crucial first step for when starting out with any new task, however, as finance can be a scary prospect for some, then you won’t want fear to hinder your chances of success.
You should be positive, confident, and even enjoy doing the job at hand, in order to achieve your financial destiny.
You are the most important tool. Look after yourself first at all times, so you’re not only free of worry and depression but also you can be in the right state of mind to receive new inspiration and higher productivity.
Methods for self-improvement:
- Exercise regularly; it’s a proven fact that exerting your body physically can cause the brain to release the feel-good chemical endorphins – giving you a much pleasurable and relaxed mood.
- Eat well; the phrase ‘you are what you eat’ rings very true! Ensure you are consuming enough vitamins, proteins, good fats, and Omega-3. Eating healthy with exercise will not only make you happier over the long-term, but it will give you greater confidence.
- Engage in a hobby; this can range from participating in the arts, sports, writing, crafting, drawing or theater. This indulgence will engage your mind and is very lethargic (joining a class will get you mixing with a new inner circle too). Unsure on what you can do? What activities did you like doing as a kid? Usually, things you liked doing then will still be within you, it’s just the case of reconnecting with past time passions.
- Socialize often; life isn’t just about work! Make sure you meet up with family and friends on a regular basis – humans are meant to be social creatures, so you’ll feel more fulfilled in life.
- Look into self-help; people have their own variety of methods to do this. Instead of sticking with the negative crowd, turn your attention to successful role models.
- Meditation and yoga; these can give you enormous benefits – meditation can bring your brain back to a state of relaxation, when under pressure, and it will ease stress and anxiety. When your mind is uncluttered with stress, this can help for inspiration and new ideas.
- Study the theory of mindful awareness, and learn to appreciate the things that are going great in your life already.
Don’t be too hard on yourself, you can’t rush yourself to be a success magnet. But you can instead create goals little by little, and your growth and confidence will develop in your own comfortable speed.
You should always set your goals up for a win, rather than starting off too ambitious. If you don’t hit your goal, then this may damage confidence and kill your motivation.
If you have mastered this method correctly, then you should be ready to conquer any challenges that may arise!
4# Take control of your finance
What you can do here will depend on where you are in life; if you are under heavy debt and your bank balance is always in the red, then the good news is that there’s still a way out – all it takes is good financial planning.
The first thing you should do is make a budget.
Using a budget calculator
This should be your first initial step, for when sorting out your finance. Even if you are high in debt and it feels like a pointless exercise, knowing exactly what your income and outgoings are will give you a better feeling of being in control.
Other benefits of setting up a budget:
- It is very quick and easy, even if you aren’t good with numbers.
- You have less chance of getting further into debt.
- You can higher your chances of getting approved for loans and mortgages.
- It can improve your credit rating.
- Good financial planning can lead to higher disposable income and savings.
How to get started with setting up a home budget calculator:
My Money Platform is a free budget calculator; it can accurately give you a realistic budget within minutes, whilst providing an easy to use and simple interface.
You only need to gather all your bank statements, and then list all your monthly/annual outgoings vs your assets.
The calculator will do the rest of the work for you.
It will also tell you what age you can retire and how much you will have saved, highlights where you can make cuts, along with other very useful tips.
How can I deal with debt?
If you have multiples of debt like credit cards, loans, store cards and other forms of borrowing, then you should consider looking into a debt consolidation loan.
This can help you pay off all debts in one lump sum, and turn all your liabilities into one simple loan with the advantage of reducing interest.
Making cutbacks on your spending
This can be achieved in numerous ways, and having a finance budget will highlight any unneeded spending. You can action the following:
- Spot any unnecessary habits, and make changes to reduce costs e.g. if buying your lunch for work every day, you could instead make your own lunch.
- Use comparison sites to find cheaper utility and service providers.
- Check your direct debits and cancel anything unwanted e.g. if you haven’t been to the gym for 6 months, but are still paying membership then it might be wise to cancel.
- Try and cut back on car journeys, which should reduce fuel cost.
There are many ways to cut your outgoings.
Don’t go overboard, if there’s an activity you like doing, but is costly, then you should keep that in your budget – so it doesn’t mean compromising your leisure time.
Cutting down on spending and consolidating your debt into one loan will definitely propel you forward to more certainty with your finance.
3# Increase your income and make money
This may seem an unlikely option, but with access to the world wide web, there are many options to make money.
This comes down to how happy you are in your job. If you are working in a mundane job just to get by, with unlikely opportunities to progress, then try and moving onto a different career or set up a business.
Learning a trade or setting up a business can be the new direction you need for a more rewarding work-life.
- Take small action each day, whilst setting goals.
- If your new career requires a costly university course, then do your financial budget and review where you need to be, in order to finance your training (contact the college and see if they offer any advice).
- Set up a business; this can range on what you want to do, but there are always opportunities out there.
- If you are looking into being an internet entrepreneur, then check out my post: Top 5 online business ideas
Making big changes can be a scary prospect, so let yourself in gently, and don’t be over-ambitious on goal setting (as mentioned in the previous step).
However, there may be those of you who are happy in your job and have a decent salary already but are only looking into outside investment opportunities.
Here’s a list of ideas for earning extra money:
- If you don’t mind putting in the extra graft after work hours, then you could set-up an online business part-time, so you can top up your monthly wages.
- Make shrewd investments in the stock market; although the global GDP is rocky at this moment, there’s still safe havens where investors turn to in more turbulent times e.g. gold.
- Is your home a bit cluttered? Then go minimalist and sell everything on e-bay, or attend local car boot sales.
- Make crafts and sell online.
The list can be endless as there’s no limitation for where your own ideas can get you.
2# Avoid too much indulgence in the news
I don’t mean hiding in a cave and never reading the news again, but only check in now and then just to get the gist of what’s going on in the world.
You should avoid getting sucked in and letting the fear or anger put you in a negative state of mind – this will deflate spirits and leave you demotivated.
Instead, take risks, believe in yourself and keep trying! If you are at rock bottom anyway, then you haven’t really got anything to lose.
Never read the news when you first wake up, instead, reinforce yourself with positive affirmations – this higher energy will prolong throughout the day.
1# Reinforce your current job
Another flaw from having a recession is the chances of being made redundant. Unfortunately, it’s a situation that is out of your hands, however, here are some tips for minimizing your risk of getting the boot:
- Always try and look for ways to get promoted; you can check with HR, bulletin boards, or even asking your line manager.
- Always conduct your job with enthusiasm and to the best of your ability.
- Although it can be very difficult, but keep time off to a minimum, as many employers’ have very strict absence policies – minimize sickness by keeping healthy, eating a balanced diet, sleeping well, and being happy.
- If there are no promotion opportunities, then look to see if there are any courses e.g. learning first aid or being a fire marshal.
Although this won’t cement your job position, it will further your chances of being kept on. When a business does have to make these difficult situations, naturally they will keep on the staff that seems more valuable.
A stage in life is only what you make of it, whether we are in a recession or the most prosperous economy in the world. It’s hard times ahead, but don’t use it as an excuse to stop you reaching your dreams and goals.