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M.Y.R.P.: Make Yourself Recession Proof

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M.Y.R.P.: Make Yourself Recession Proof

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If Chicken Little were a financial pundit on cable news, he’d be exclaiming, “A Recession is coming! A Recession is coming!” In today’s age, the amount of information being thrown at the average individual is astronomical. Information overload deadens our senses to not only what is pertinent to us, but what has veracity. Instagram, Facebook, CNN, FOX News, advertisements, and all other media sources of sound bytes provides us with a steady stream of data for our brains to sort through. If you are plugged into any media outlet, you have undoubtedly heard some news of an impending recession. This noise is usually accompanied by a series of financial analysts and economists pontificating on their unique argument supporting their recession forecast. News outlets in general have been calling for a recession since before the 2016 presidential election. This begs the question- who actually knows what they’re talking about? The short answer is, not many. Oddly, in spite of the most scholarly and experienced economists’ predictions, the economy is so multi faceted that they often fall flat in retrospect.

What is a Recession?

The term recession indeed gets thrown around quite a bit in today’s world. A fear mongering technique of Wall Street reporters, the threat of impending recession makes a worthy headline for papers and news stories. A recession is defined as follows: “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters” (Chappelow, 2019).  AHH! I’m scared already! Let’s also talk about GDP. GDP stands for Gross Domestic Product.  It is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. GDP is measured yearly. From year to year, the percentage growth of the USA’s GDP is tracked and compared to what’s considered adequate growth. Ideally, you want your country’s GDP to get larger every year. If it shrinks, apprehension regarding the country’s overall economic health begins to spike. 

Your income is what you use to build a strong financial castle. When dollars come in, do they leave through the back door? Or do some of them stay to help fortify your walls?

Why Should You Care About a Recession?

I know, right? The definition of a recession didn’t quite do it for me. Why should I care? There are reasons to be cognizant of the overall economic status of the Country, but they’re far less dire than the news would have you believe. Think about your individual financial status as a castle. How strong are it’s walls? How is the foundation? Are you struggling to build even the framing to your ideal structure? Also, how stable is your job? Are you in an industry that is seasonal and/or based on how great the economy is doing? For those of us in the Healthcare Industry, external economic factors tend to not drastically affect our employability. However, someone working in retail, finance, sales, construction, or other jobs reliant on economic prosperity has more reason for concern. Think about how stable your income is. Your income is what you use to build a strong financial castle. When dollars come in, do they leave through the back door? Or do some of them stay to help fortify your walls? You must assess how impervious you are to external factors. Once you erect your castle walls, build a moat around it. Make yourself recession proof by putting more and more layers of defense between you and what can financially harm you.

How to Make Yourself Recession Proof

You must start with a self assessment. Do you know how much debt you have? Debt increases your Financial Gravity and makes you more vulnerable to external economic factors. How much cash do you have earmarked strictly for emergencies? Unfortunately, 75% of households cannot afford a $400 emergency. If an emergency arises, are you sliding your credit card? Murphy’s Law loves to haunt those who are vulnerable. This is just financial basics. Making yourself recession proof is even more than this- it is identifying weaknesses in your financial plan that are affected by external economic changes. If you have a physically high-risk job, you should have insurance in place to make sure you and your loved ones are covered in the event you are hurt and perpetually unable to work. If mortgage rates change- do you have a mortgage that is a variable rate? You can refinance to lock in rates while they are at historic lows. Does an economic shift change your employability? If so, you should have lots of cash saved for a period of unemployment. You should set a goal to save six months of monthly expenses in a savings account earmarked for nothing else other than an emergent event like a job loss.  

Recessions Cannot Destroy a Strong Financial Castle

The takeaway is that while a recession can affect many if the economy continues to decline, what you do to strengthen your personal financial position is far more important. What is happening on Wall Street has much less vital than what is happening on your street. A recession may come and whipsaw the longest period of stock market growth since the Great Depression, but it doesn’t have to have the power to raze the financial house you build. Build your castle, put up your defenses, and dig a moat. You will prosper no matter what the economy decides to do.

About the Author

Contact Bruce Breedlove at iFireFinance for questions or comments about this article! He is our Finance Personality and Registered Nurse at Mayo Clinic in Jacksonville, Florida. Bruce offers Personal Finance Coaching services for clients anywhere in the country! Check him out on Instagram at @iFireFinance. Contact him for a FREE consultation regarding a personalized financial plan!

Chappelow, J. (2019, August 29). Recession Definition. Retrieved from https://www.investopedia.com/terms/r/recession.asp

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