How to survive a financial recession

A financial recession can be a tough time for anyone, but with the right strategies and mindset, it’s possible to weather the storm and come out stronger on the other side. In this article, we’ll discuss some tips for budgeting, modifying investment strategies, and living more inexpensively in order to survive a financial recession.

The Great Recession

Let’s take a trip back in time to 2007-2008. Do you remember the Great Recession? When global GDP declined by more than 5%, unemployment reached 9%, the housing bubble popped and home values tanked, and seemingly everyone struggled for several years to make ends meet?

We are in a similar situation in 2023 and while it is difficult to predict if another financial recession will occur, the writing is on the wall and it feels like it is coming to many of us, including myself. The economy is coming out of a period of easy money, in which the Federal Reserve’s stance on keeping low interest rates has caused a significant amount of “easy” credit-based cash to flow into the economy, causing consumers to spend, spend, spend – whether they can afford it or not. This includes major expenses like housing, vehicles, investment properties, RVs, and more. This spend has caused companies to raise prices, which you’ve likely experienced over the past 2+ years. It has gone on so long that not just housing bubbles have been created and sustained, but other asset bubbles as well including within the car, stock, and rental markets.

Now, the Federal Reserve has reversed course on its monetary policy, increasing interest rates to over 5%. This period called “Quantitative tightening” is attempting to pull money from the economy in effort to combat the rising costs of goods (aka inflation).

Because of this quick pivot, the macro economic situation is increasingly instable. Toss in several serious bank failures and you’ve got an economic situation which is hard to feel positive about. Given what may be on the horizon, preparation is the only course of action. Here are several ways you can survive a potential financial recession.

Budgeting tips

When money is tight, it’s more important than ever to make a budget and stick to it. Here are some tips for budgeting to survive a recession:

1. Track your spending. The first step in creating a budget is to figure out where your money is going. Track your spending for a month or two, either with a spreadsheet or an app, and then look for areas where you can cut back.
2. Prioritize your expenses. When you’re on a tight budget, it’s important to prioritize your expenses. Start with the essentials, like housing, food, and transportation, and then work your way down to discretionary expenses like entertainment and travel.
3. Cut back on non-essentials. Look for ways to cut back on non-essential expenses, like eating out, subscription services, and shopping for clothes and gadgets. Consider cooking at home more often, cancelling unused subscriptions, and shopping for necessities at discount stores.
4. Use cash or a debit card. When you’re on a tight budget, it’s easy to overspend with a credit card. Instead, use cash or a debit card to stay within your budget and avoid debt.

Investment strategies

During a financial recession, the stock market can be volatile and unpredictable. Here are some tips for modifying your investment strategies during a recession:

1. Diversify your portfolio. One way to survive a recession is to diversify your investment portfolio. Consider investing in a mix of stocks, bonds, and other assets, and spread your investments across different industries and regions.
2. Invest in quality companies. During a recession, it’s important to invest in quality companies that have a strong balance sheet, solid earnings, and a history of dividend payments. Look for companies that are leaders in their industry and have a competitive advantage.
3. Focus on long-term investing. In a recession, it’s easy to get caught up in short-term market fluctuations. Instead, focus on long-term investing and stick to a buy-and-hold strategy. This will help you ride out the ups and downs of the market and avoid making emotional investment decisions.
4. Consider alternative investments. During a recession, alternative investments like real estate, commodities, and private equity can offer diversification and potentially higher returns. However, these investments can also be riskier and require a higher level of due diligence.

Living inexpensively

Living more inexpensively can be a challenge, but is essential to survive a recession. Here are some tips for cooking and living more inexpensively:

1. Cook at home. Cooking at home is one of the easiest ways to save money. Look for recipes that use inexpensive ingredients and cook in bulk to save time and money.
2. Buy generic or store-brand products. Buying generic or store-brand products can save you money without sacrificing quality. Look for generic versions of your favorite foods and household items, and compare prices to find the best deal.
3. Shop at discount stores. Discount stores like Aldi, Dollar Tree, and Walmart can offer significant savings on groceries, household items, and other essentials. However, be sure to compare prices and check for quality before you buy.
4. Cut back on energy usage. Cutting back on energy usage can save you money on your utility bills. Turn off lights and electronics when you’re not using them, adjust your thermostat to save energy, and consider using energy-efficient appliances and light bulbs.

Cooking

Cooking your own food can be one of the most effective ways to save money and survive a financial recession. Here are some tips for cooking your own food:

1. Plan your meals. Planning your meals ahead of time can help you save money and avoid waste. Take a few minutes each week to plan out your meals and make a shopping list based on the ingredients you’ll need.
2. Shop in season. Buying produce that is in season can be a great way to save money and support local farmers. Check your local farmers’ market or grocery store for seasonal produce, and look for recipes that use those ingredients.
3. Cook in bulk. Cooking in bulk can save you time and money, and provide you with meals for several days. Consider making a big batch of soup, chili, or casserole, and portion it out for easy meals throughout the week.
4. Use inexpensive ingredients. There are many inexpensive ingredients that can be used to make delicious and nutritious meals. Beans, lentils, rice, and pasta are all affordable staples that can be used in a variety of dishes.
5. Use leftovers creatively. Leftovers can be a great way to save money and reduce waste. Consider using leftover chicken or vegetables in a stir-fry or salad, or using leftover rice or pasta in a casserole or soup.
6. Invest in quality cookware. Investing in quality cookware can save you money in the long run by reducing waste and allowing you to cook more efficiently. Look for cookware that is durable, versatile, and easy to clean.
7. Learn basic cooking techniques. Learning basic cooking techniques can help you save money by allowing you to cook more creatively and efficiently. Consider taking a cooking class or watching online tutorials to learn how to chop vegetables, cook meat, and make sauces.

By following these tips for cooking your own food, you can save money, eat healthy, and enjoy delicious meals during a financial recession. Cooking at home can be a great way to take control of your finances and improve your overall well-being.

Traveling

Traveling, while is probably not the most immediate thing you think of if trying to survive a recession, can be challenging, but it’s not impossible. Here are my tips for traveling during a recession:

1. Plan ahead. Planning your trip well in advance can help you save money on flights, accommodation, and activities. Look for deals and discounts, and consider traveling during the off-season to save even more.
2. Consider alternative accommodations. Hotels can be expensive, especially during peak travel season. Consider alternative accommodations like vacation rentals, hostels, or camping to save money.
3. Use public transportation. Renting a car can be expensive, especially if you’re traveling in a foreign country. Use public transportation like buses or trains to save money on transportation costs.
4. Research free activities. Many destinations offer free or low-cost activities that can be just as enjoyable as expensive tourist attractions. Research local parks, museums, and cultural events to save money and experience the local culture.
5. Bring your own food. Eating out can be expensive, especially in touristy areas. Consider bringing your own snacks or packing a lunch to save money on food.
6. Avoid unnecessary expenses. Avoiding unnecessary expenses like souvenirs, bottled water, and tour packages can help you save money during your trip. Stick to a budget and be mindful of your spending.
7. Consider staycations. If traveling is not within your budget during a recession, consider taking a staycation instead. Explore your local area, visit nearby attractions, and take advantage of local deals and discounts.

Traveling may require a bit more planning and budgeting, but it can still be a rewarding experience. By being mindful of your expenses and looking for ways to save money, you can still enjoy a memorable trip without breaking the bank.

How to spend free time

It’s important to be mindful of your expenses and find ways to save money. This may mean cutting back on expensive hobbies or entertainment, but it doesn’t mean you have to give up on fun and fulfilling activities altogether. The best part? These are all cheap, if not completely free to do in some form or another. Below are some ideas for how to spend your free time while surviving a financial recession:

1. Read. Reading is a great way to expand your knowledge and escape into new worlds without spending a lot of money. Visit your local library or borrow books from friends to save even more.
2. Exercise. Exercise is not only good for your physical health but also your mental health. Consider taking a walk, going for a run, or trying a yoga class to stay active and reduce stress.
3. Volunteer. Volunteering is a great way to give back to your community and make a positive impact. Consider volunteering at a local food bank, animal shelter, or community center.
4. Learn a new skill. Learning a new skill can be a fun and fulfilling way to spend your free time. Consider taking an online course or learning a new language.
5. Spend time with loved ones. Spending time with loved ones doesn’t have to be expensive. Consider having a game night, cooking a meal together, or taking a walk in the park.
6. Explore the outdoors. Exploring the outdoors can be a great way to stay active and appreciate the beauty of nature. Consider taking a hike, going camping, or having a picnic in the park.
7. Get creative. Getting creative can be a fun and fulfilling way to spend your free time. Consider painting, drawing, writing, or playing music.

By finding inexpensive or free ways to spend your free time during a recession, you can still enjoy fulfilling and enjoyable activities without breaking the bank. The key is to be creative, stay positive, and find joy in the simple things in life.

Conclusion

Surviving a financial recession requires a combination of smart budgeting, modified investment strategies, and living more inexpensively. By tracking your spending, prioritizing your expenses, and cutting back on non-essentials, you can create a budget that will help you weather the storm. By diversifying your investment portfolio, investing in quality companies, focusing on long-term investing, and considering alternative investments, you can reduce risk and potentially increase returns. Finally, by cooking at home, buying generic or store-brand products, shopping at discount stores, and cutting back on energy usage, you can live more inexpensively and stretch your budget further.

It’s important to remember that a financial recession is a temporary setback, and with the right strategies and mindset, you can come out stronger on the other side. By staying focused on your goals, staying disciplined with your budget, and making smart investment decisions, you can build a foundation for long-term financial success.

Check out some of our other financial tips for more ideas.