Worries about a recession? At BLS we are committed to help you both personally and professionally weather the economic storms. Here are some thoughtful tips to hedge against the economic headwinds. There are several financial strategies that individuals and businesses can consider preceding an economic recession:
- Build up an emergency fund: Having an emergency fund can help you weather financial storms during tough times. Aim to have three to six months’ worth of living expenses saved up in a high-yield savings account.
- Pay off high-interest debt: If you have high-interest debt, such as credit card balances or personal loans, prioritize paying them off before the recession hits. This will reduce your financial obligations and free up more money to cover other expenses.
3. Diversify your investments: Don’t put all of your money in one basket. Consider diversifying your investments by spreading your money across a range of assets, including stocks, bonds, real estate, and commodities.
4. Re-evaluate your budget: Take a close look at your budget and identify areas where you can cut back on expenses. This will help you free up more money to save or invest.
- Build up cash reserves: Just like individuals, businesses should have an emergency fund in place to help them survive during tough times. Aim to have enough cash reserves to cover at least three to six months’ worth of operating expenses.
- Diversify your customer base: Don’t rely too heavily on one or two major customers. Instead, diversify your customer base by targeting new markets and customers. This can help you weather downturns in specific industries or regions.
- Reduce debt: If your business has a lot of debt, consider refinancing or consolidating your loans to reduce your monthly payments. This can free up cash flow to help you weather a recession. Consider selling under performing or non-performing assets early while there is a market for the asset. As values decrease, you may find yourself in a pinch to wholesale to the lowest bidder.
- Control expenses: Take a close look at your expenses and identify areas where you can cut back. Consider renegotiating contracts with suppliers, reducing staff or hours, or implementing cost-saving measures such as energy-efficient lighting or telecommuting.
- Maintain a strong relationship with lenders: If you need to borrow money during a recession, it will be easier if you have a strong relationship with lenders already in place. Maintain open lines of communication with your lenders and keep them updated on your business’s financial health. The rule of thumb is, lenders only lend to those who do not need it. So, apply for a loan early in a recession. It is better to have it and not use it, then to be denied on your loan request when you need it the most.
- Focus on customer retention: During a recession, it can be harder to attract new customers, so it’s important to focus on retaining the ones you already have. Consider offering loyalty programs, discounts, or other incentives to keep your customers coming back.
Above all maintain a long-term perspective: Remember that recessions are temporary and that the economy will eventually recover. Avoid making rash decisions based on short-term market fluctuations and instead focus on your long-term business goals.
By implementing these financial strategies, businesses can position themselves to weather an economic recession and emerge stronger on the other side.
It’s also worth noting that it’s never too late to start implementing these strategies, even if you suspect a recession is already underway. By taking steps to shore up your finances, you’ll be better equipped to weather whatever economic challenges come your way.
Let us know which steps (if any) you are taking to not only survive, but thrive in 2023!!