I have spent the last 2 years learning how to really survive an economic recession or depression.
Here is what I figured out from implementing what I learned.
Hopefully, you will find it useful.
1. Hold a lot of cash.
Have you heard the saying “cash is king?”
This is so true, and can’t be much truer than during the period of an economic downturn.
So how much is a lot of cash?
This depends on your income, lifestyle, family, and your other commitments like charity.
A general rule is to have at least 6 months of monthly expenses saved up for unforeseen circumstances.
As matter of fact, if you’re very rich or wealthy, you can save up 1 year, 2 years, or even 5 years of monthly expenses.
This will enable you to weather any storm and at the same time, you have the opportunity to try things out without too much pressure.
You will be patient enough to get paid for your work or business in the coming months.
You won’t jump after every opportunity.
You will only go after the best.
In short, you would be emotionally stable.
And don’t mistake liquid investment for cash.
Cash is stable while liquid investments aren’t.
Cash is available whenever needed but the liquid investment can be inaccessible for a period of time.
2 Reduce your expenses
One of the best things you can do when you notice a potential economic decline is to reduce your daily, monthly, and yearly expenses.
If your income or business revenue stops increasing like it usually does during a recession or economic downturn, you need not spend as you have always been doing.
A major mistake I made was waiting too long before I cut my expenses.
I still gave my family members and employees this idea that we still got a lot of money to spend as we wish even though business wasn’t going as smoothly as we expected.
This negligence can get really messy and fatal.
I will suggest you start cutting expenses immediately when you notice that your income starts dwindling or nose-diving.
Unlike me, don’t wait till you notice there is no more money before you start cutting costs and expenses.
Do it early so you can have some savings, and you will be able to withstand the storm.
This way you will be proactive and not reactive.
You will save your business and family members from the sudden surprise of brokenness, hunger, and having to realize there is no money left.
3. Reduce your number of investments
During an economic downturn, many sectors of the economy will experience a decline in growth because most people(business owners, employers, employees) won’t be making as much money as they used and as a result, they would be spending less.
This is not the time to start making a lot of investments because many such investments won’t do well.
I made the mistake of just throwing money at every investment that could make me money and I paid heavily for it.
I purchased a lot of expensive courses, tools, and machines to equip myself and my businesses but I eventually realized most of my clients can’t pay as high as I needed so I can break even.
While I’m not discouraging people to invest in themselves and their businesses, I believe a recession is not where you buy all the expensive items.
If you can possibly borrow, borrow.
If you can do without that machine, do without.
You have to be strategic and diligent in choosing the best items and investment deals.
In fact, I will suggest you pass out on a lot of deals and hold unto your money until you see a reversal or positive change in the economy
4. Use your cash to buy cheap assets when the economic recession hits hard and many people are selling their assets to stay alive.
One of the lessons I learned from watching the Youtube video of an internet entrepreneur yesterday was that you should not only avoid being stupid but we should capitalize on the stupidity of others ethically.
Let me explain this further:
While we are avoiding being stupid by preparing for the recession, holding cash, and reducing our expenses/investment, we should also benefit from those that are not well prepared and need to sell their asset in other to pay living or business expenses.
I believe this is ethical because you’re providing these people with money in other for them and their businesses to stay alive in exchange for their assets. And if you’re willing to wait till we experience the next economic growth, you can sell those assets at a premium price.
Note that you’re also taking a risk and there is really no guarantee of making money from the asset you bought unless you wait for the economy to become better.
Should in case you make the mistake of spending all your cash reserve on buying assets and the economy is yet to recover, and you need cash, you would also be forced to sell at a loss.
So carefully evaluate the asset you want to buy, the cash reserve you have, and whether the economy would soon turn into a period of massive growth.
A lot of this is determined by the Federal Reserve Bank’s printing of money but that’s a story for another day.
5. Have friends with complementary skills so that you can support each other.
If all your friends are into Web technology for example, and the industry is badly hit by the recession, you will have a hard time making money and getting support from each other.
I believe this is where your networking skills matter.
Network with individuals who will keep making money in a recession. Examples are lawyers, doctors, politicians, bankers, farmers, etc.
If you have these people as friends or customers, you will keep making money or have access to cash during a recession.
6. Start a new business during a recession
A recession is a good time to start that particular business you had in mind and you were not able to do during the market boom.
If you’re able to provide a better service or product than your competitors, you will definitely make some money.
Mind you, it’s not advisable to start multiple businesses at the same time during a recession.
I did this and I learned the lesson the hard way.
I ended up blowing my cash reserve of tens of millions of naira quickly and my farming, real estate, construction, and IT training business that I started at the same time wasn’t yet profitable.
Please, hold onto the majority of your cash and try out one or two good business ideas that you can successfully manage during the period of the economic downturn.
7. Learn how to sell
Sales is a skill you must have whether we are in a period of economic growth or decline.
I believe it’s even more important when the market is declining.
You must be able to convince people that what you have to sell to them is more valuable for them than their money and it would transform their life/business.
If you do this, they would hand over their money to you.
If you find yourself completely broke in an economic downturn, selling is how you can start making money to survive the situation.
Sell yourself into a job.
Sell people’s houses for them.
Help them sell their cars or computers. etc
So that’s the 7 points I have for you as regards surviving a recession.
Make sure you hold a lot of cash, reduce your expenses, make less /gradual investments, use cash to buy cheap assets at the bottom, start a new business, have friends with complementary skills, and finally, make sure you master the skill of selling.
I hope you have found the few points helpful.
Let me know if you have gone through a recession before and how you came out successful.
And in case you haven’t been through a recession, let me know how you’re planning to beat the next recession or economic depression.
Ensure you comment below.
