Leaders of fortune 500 companies across the world have hinted in discussions that there will be a recession in 2023. In Nigeria, a lack of security, peace, food security, enabling environment for professionals and investors has led experts to predict a grim recession in 2023. The people who can minimize this economic turmoil for Nigeria are channelling their resources into winning seats in the forthcoming general elections.
This may seem hopeless for the average guy, but a recession is not new in the world. It is necessary to reset global affairs. This article explores four ways to prepare for a recession and emerge in a good position.
What Is a Recession?
A recession is a continuous downturn in a country’s (sometimes global) economy over a while (months or years). During a recession, a country’s GDP undergoes a downward spiral as the value of its exports (goods and services) declines. Also, the prices of consumer goods may increase significantly (inflation), and the unemployment rate rises too high as businesses lay off workers to cut costs.
What Are the Effects of Recession?
When an economic recession occurs, small businesses (and big companies) generate less revenue since their customers have less to spend or are reluctant to spend. This results in the economy of the country becoming stagnant.
Because of the loss of revenue, businesses have no choice but to let most of their employees go. As a result, an accumulation of job cuts across the country increases the country’s unemployment rate.
The stock market, foreign exchange, and real estate lose value. Hence, the country’s currency loses its value. In addition, financial institutions raise their interest rates and requirements for getting a loan. Thus, money does not flow through the economy.
4 Ways to Thrive in the 2023 Recession
Recessions are not new to the global economy. They help restore balance after decades or centuries of untethered growth. There are stories about people who become extremely rich on the back of a recession. However, you are probably thinking of just holding on to the little you have and not struggling during the recession. Here are four ways to prepare yourself to thrive during the 2023 recession.
Build Up Your Emergency Funds
Emergency savings help a lot during a recession. Having money saved up means you won’t have to borrow at exorbitant interest rates or exploitative terms from lenders. Also, your savings secure you from troubles resulting from a job loss; remember, companies are likely to let their workers go during a recession.
You can only be sure when a recession will end, especially in a country like Nigeria. Therefore, you must build up enough savings to cover your expenses for 6 to 12 months. Your saved-up cash affords you enough time to find a new job which could be difficult during a recession.
Create a Spending Budget and Stick With It
Most people spend more than they need to on basic necessities. In addition, every time your earnings increase, your spending also increases.
For instance, when you earned 50K per month, you spent 20K on feeding. Then you got a raise or switched jobs to make 80K per month. Suddenly, 20K is not enough to feed you anymore; you started spending 35K on feeding.
This is a person’s behaviour who will only build a little wealth. Yes, you can afford to spend more when your earnings increase, but do you have to?
Do a truthful audit of yourself; how much of your consumables make you happy? Then, create a budget for every consumable and leave a little for unforeseen expenditure. Any money beyond your budget should go to your savings. The plan is to create a massive gap between how much you earn (income) and how much you spend (expenditure). To do this, find ways to reduce expenses and increase your earnings.
Switch Jobs Often to Earn More
Therefore, the best way to earn a raise is to switch jobs. HR professionals will argue this is bad and that you have no loyalty. Loyalty does not feed you or keep you recession-proof. Commitment won’t help when your boss chooses to fire you.
Be a diligent employee, but keep yourself open to opportunities. Check out job websites for roles you can fill that pay more than you currently earn. Bridge the skill gap that makes you unfit for a better-paying job and plans your exit as soon as possible.
Work-life is short.
Imagine you got your first job (entry-level) at 23; in 20 years, you will be 43. If loyalty and commitment made you stay at a low-paying job for too long, you would probably be in contention for the same job as a person in his early 30s when you decide to switch positions (or when you are fired.) However, most companies would instead hire a younger person for their energy and lack of responsibilities outside work – at 43, you are probably married with kids.
The purpose of a job is to earn money; if you need to make more, look for opportunities and leave. Also, prioritize jobs in industries that are recession-proof. These industries stay up even in a recession, e.g., the healthcare industry, logistics, delivery industry, and government.
Have Several Sources of Income
Imagine you were laid off. That image already stresses you if you have just one job. This should motivate you to create other streams of income for yourself.
This could be as simple as a side hustle using the same skills you use in your day job. Let your colleagues, friends, and family know you are open to freelance opportunities in your field. Also, picking up another remote job will be good if you work remotely for your company, provided you succeed in your duties to the two companies. For instance, if you work as a digital marketing executive, and you can offer search engine optimization services to people to increase your earnings.
In addition to side hustles, you can create passive income opportunities. Passive income opportunities help you earn money without much input from you. Examples include blogging, digital products, and real estate investment. You don’t need to devote all your energy to making money from these things; some of them can earn you enough money to quit your day job.
You Can’t Predict the Future
The recession probably won’t be as brutal as predicted, but it would be best if you prepare yourself. Use the four ways explored above to make yourself recession-proof and earn enough to keep you afloat during this turbulent situation.
To avoid unpleasant surprises and thrive during a recession, leave within (or below) your means, create emergency savings, switch your job to earn more and create several income streams.