About six months before the pandemic, I started a post draft titled, “Is a recession coming?”, and I never finished the post.
It’s kind of funny to look back, because yes, we did have sort of a recession during the pandemic.
Then there was an economic resurgence, but now I keep seeing, “A recession might be on the way!” types of headlines.
I think there’s some value in paying attention to these things, largely so that you can be prepared. But honestly, I think it might be better to always be prepared for economic difficulties.
This is wise partly because no one really truly knows when a recession is coming until it’s practically here. And at that point, it’s a little late to start prepping!
The other reason, though, is this:
Regardless of what’s happening in the economy at large, it’s always possible that a “personal recession” might hit you.
(I think I first heard this term on the How to Money podcast, although I don’t know who originally coined the phrase.)
A personal recession is basically a period of hard financial times for you, not necessarily for the larger economy.
Things that come to mind are:
- job loss
- an injury that prevents work for a period of time
- a series of big expenses
- anything that keeps you from working (or makes you work fewer hours)
Because these sorts of difficulties are always a possibility, even in a booming economy, I think it makes sense to always be prepared to weather a recession, whether it’s personal or not.
So, here are three basic things that you can do to prepare for a personal recession. If you’re already doing ’em, great! If not, now is always a good time to start.
1. Spend less than you earn
Spending less than you earn means that your monetary surplus can consistently grow.
A personal recession hurts no matter what, but it’s a lot less painful if you aren’t already living in a near-disastrous financial state.
Monetary cushioning = more peace.
There are a million ways to spend less than you earn (I’ve been writing about that for years now), but one key thing is to set yourself up for sustainable, repeated success.
Basically, you should look for things that offer repeated savings over time.
For instance, you could find a good price on paper towels, but if you switch to t-shirt rags, dishcloths, and kitchen towels, you’ll save way more over time.
You could work the deals and get some tampons at a serious discount, but if you switch to a menstrual cup, you’ll enjoy the savings every month for years.
The same goes for switching car insurance, switching to a low-cost cell phone plan (we love Mint Mobile SO MUCH), choosing a reliable car that takes regular gas, and so on.
One-off savings are good; repeated savings are better!
2. Get good at living well on a low budget
If you’ve been living large and then a personal recession hits, the adjustment to a low-budget life will be rather painful.
But if you have already honed your living-on-a-small-budget skills, you will be less stressed when a personal recession hits you.
I’ve felt the relief of this in my current circumstances; I’m kind of in the midst of a personal recession and I don’t really see that changing in the super near future. Heck, it may actually get worse before it gets better.
But I don’t feel terribly stressed about it; I already know how to make a beautiful life on a shoestring budget, so I think I’m going to be fine.
3. Earn more money
I’m a huge fan of money-saving activities, of course! But I am also a fan of earning money.
If you do not already have a financial cushion and you want to get prepped for a personal recession, frugal habits can help some.
However, upping your earnings can really speed up your personal recession prep!
If you have a job already, you could ask for a raise. Or you could switch employers.
But there are other smaller moves you can make too, depending on your skill sets.
In my adult life, my side hustles have included babysitting, freelance writing, and photography, and I’ve played the piano for weddings, funerals, parties, and churches.
And though it’s never come to this, I know I could hire myself out to help people declutter/organize.
What are you good at? There’s probably something you could do on the side!
My friend Whitney flips furniture as a side hustle.
Some people who live in big cities make a side income charging electric scooters.
Some people pet-sit or house-sit.
Some people tutor on the side.
There are tons of possibilities!
Obviously, you don’t want to side-hustle yourself to death; it’s important to keep a balance between working and living.
But if you are in a precarious financial spot, it could be wise to buckle down for a bit and do some extra work to get yourself into a solid financial position.
But what if there’s no recession?
It’s possible that you could do this prep work and then never experience a personal recession (or a countrywide or worldwide recession).
But the odds of that are extremely low; most people hit financial bumps at some point.
And besides, if you do this prep and then never need to use your cushion, I think that’s a best-case scenario; better to have it and not need it than to need it and not have it.
Usually, I ask a single question at the end of a post, but I’ve got multiples today!