How to Survive Economic Downturns
How to Survive economic Downturns
It is important to realize that America is in recession. Unemployment rate is at 9.7%, the highest since 1983. There’s one thing I can say for sure about good times or bad times: they will come to an end. A capitalist economy is cyclical, and the events that take place in one swing of the cycle set the stage for the next. As cycles change, markets change. Boom is followed by recession, which is followed by boom.
Recessions are nothing new. According to NBER, since 1854 there have been 29 periods of economic expansion and 29 recessions. The average expansion lasted 33 months, while the average recession lasted 19 months, which means we can expect more good times than bad.
The longest recession was not the Great Depression of 1929, which ended after 50 months, but the doldrums of 1873 to 1879, which lasted for 65 months.
The essential point that you must recognize is that bad economic times will not cause you to lose money. It can slow you down, but it will not break you if you follow a simple approach. These are the things you must do during bad times;
1.During recessionary period, proceed with caution. Buy something you need and don’t buy what you don't need because it is cheap.
2.Keep your eyes on unemployment levels before you invest your money on anything. When people are losing jobs, they hold on to their cash rather than spend it. During periods of high unemployment, factories not only stop expansion, they close down. In a recession, every organization keeps its cost at a minimum. People with small offices start operating at home and people with large offices manage with less square footage. The unemployment rate is responsible for it all.
3. Be skeptical of bargains. Do your due diligence before you commit your money. Ask yourself , “if this product is so good, why hasn’t someone snapped it up already?”
4. Make offers with low cash outlays. During recessionary period, cash is king. You must conserve your cash in every way you can. If you need cash in case of emergency, where will you go? Remember, banks are not in a good position to lend. They are short of liquidity and in need of bailout themselves.
5. Get yourself a mentor or consult with an expert. You need someone with knowledge and experience to lead you and provide you all the resources and tools you need to weather the storm.
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