Protect your money with these hedges against a recession
First of all, I’m not a financial advisor, simply an enthusiast on all things personal finance, and becoming a better person overall. Below are some ways that you can protect yourself with the recession that is already here;
1. Diversifying investments
One way to hedge against economic downturns is to diversify your investments across different asset classes that are known to be recession-proof, such as real estate, laundromats, vending machines, car washes, and other related investments. This can help to reduce risk and protect against losses in any one particular asset class. While there is not much certainty about the future, one thing is guaranteed, the investments above can protect you as prices fluctuate. If prices rise, so will yours. Not only that, but these are businesses that people will always need in some form or fashion. Therefore, if you own a few vending machines, properties or larger scale like car washes or laundromats, you are giving yourself the upper hand in a recession.
2. Building an emergency fund
It is important to have a financial cushion in case of unexpected expenses or a loss of income. Building an emergency fund can help to provide a financial safety net during economic downturns. This can be something as simple as putting away $150/m for unexpected emergencies. This number can fluctuate based on your budget. It’s ideal to put away 5% or more of your take home pay monthly for emergencies. (Because they will happen. Don’t be a numbnuts and not put money away for a rainy day)
3. Reducing expenses
Another way to prepare for a recession is to reduce unnecessary expenses and focus on saving money. This can help to increase your financial resilience and give you more flexibility to weather economic challenges. It’s easy to think that nothing bad can happen to you but life is full of surprises. I’d recommend setting up a bucketed amount every month so you’re able to spend money with peace of mind. Not only that but the left over amounts that you have can go to your emergency fund and your investment fund to help expedite your cushion from your expenses.
4. Strengthening your skills and education
Investing in your own education and skills development can help to make you more competitive in the job market and increase your employability, which can be especially important during economic downturns when job opportunities may be more limited. Our skills are something that can’t be taken away. So do everything you can to consistently develop your education and self-improvement. These can be books, conferences, mentorships, courses, or youtube university. In the grand scheme of things, an investment in yourself yields the highest returns since as your knowledge grows, so does your income. But please note, it’s not about how much you make, but how much you keep that matters.
5. Set a budget and stick to it
While budgeting is a common topic for most, it’s repeated for a reason! It works! You can either do it manually VIA google sheets to track all income and expenses for the month by tracking your credit card and bank statements. Otherwise, you can use intuit mint for a free tracker on your income and expenses. If you want to see an overview of your net worth, use Personal Capital. There’s huge value in understanding where your money is going every month as “what gets measured, gets managed” as Peter Drucker says.
Overall, the more your can protect your downside by making investments in recession-proof businesses, tracking your spending, beefing up your emergency fund, and investing in yourself, it’s hard to lose.
Thank you for reading, please leave some juicy claps, drop a comment and follow along as we will continue talking about all things personal finance, self-improvement, and documenting the path to financial freedom!
Till next time,
- Eric