5 Personal Finance Tips to Help You Weather a Brutal Recession

The stock market and economy can’t always go up. It’s not what you do when times are good that matters, but what you do when times are tough.

When it’s time for the market to correct and potentially enter into a recession, how are you planning to manage your money? Do you have a plan for how to weather the next economical storm?

If not, don’t worry. This post reveals five personal finance tips to remember during recessions that will help position you so that you can make it through to the other side.

It might not completely get rid of the pain, but it may help to make it a bit more bearable.

What Exactly is a Recession? Generally speaking, a recession occurs when an economy experiences slowing economic activity. Normally, the GDP (output) of a country is constantly growing, so the rule of thumb for a recession is two consecutive quarters of declining GDP.

Remember The Golden Rule of Investing When a recession hits, oftentimes people start selling their positions. They do this because they fear that the stock market will drop even lower. This is a kind of self-fulfilling prophecy because when people sell stocks it lowers the demand for them and thus reduces the price.

Look at Historical Data The human brain is weird in the sense that when times are going good, it’s easy to forget that bad times every existed and vice versa. This means that during a recession, it can often be tough to see the light at the end of the tunnel and hope is easily forgotten.

Lower Entry Points = Higher Returns If you’re young and have time on your side, you should rejoice during a recession as a market downturn allows you to pick up many assets for cheaper than you could in a bull market.

Prioritize Paying Off Debt If you’re really scared of the economy getting worse and are scared of tossing your money into a stock market that seems like it will decline further, there is an easy way to make immediate returns on your cash: pay off your debt.

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