Here’s your “recession survival” checklist provided by BEN EDWARDS, AAMS®

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Here’s Your Recession Survival Checklist

Provided by BEN EDWARDS, AAMS®

November 20, 2022
Sunday

(SitNews) Ketchikan, Alaska — It’s unfortunate, but recessions are a pretty normal part of the economic landscape. When a recession hits, how might you be affected? The answer depends on your individual situation, but whatever your situation, you may want to consider the items on this recession survival checklist:




Evaluate the stability of your income. If your job remains stable, you may not have to do anything different during a recession. But if you think your income might be at risk or disrupted, you might want to consider joining the “gig economy” or looking into freelancing or consulting opportunities.

Review your expenses. Look for ways to reduce your expenses, such as canceling subscription services you don’t use, eating out less often, etc.

Pay off your debts. Try to reduce your debts, especially those with high interest rates.

Plan your emergency fund. If you haven’t already built one, try creating an emergency fund containing three to six months’ worth of living expenses, with the money kept in a cash account.

Review your protection plan. If your health or life insurance is work-related, a change in your employment status could jeopardize this coverage. Review all of your options for replacing these types of protection. Also look for ways to reduce home or auto insurance premiums, without significantly sacrificing coverage, to free up money that could be used for health/life insurance.

Keep your long-term goals in mind. Even if you adjust your portfolio in times of volatility, don’t lose sight of your long-term goals. Trying to “outsmart” the market with short-term strategies can often lead to missteps and missed opportunities.

Don’t stop investing. If you can afford it, try to keep investing. Coming out of a recession, stock prices tend to bottom out and then rebound. Therefore, if you had moved into “marginal” investing, you would have missed the opportunity to benefit from a market rally.

Review your performance expectations. During a bear market, you will constantly be reminded of a drop in a particular market index, such as the S&P 500 or the Dow Jones Industrial Average. But instead of focusing on those short-term numbers, instead look at your portfolio’s long-term performance to determine if you’re still on track to meet your goals.

Evaluate your risk tolerance. If you’re overly concerned about declines in your investment statements, you may want to re-evaluate your risk tolerance. A person’s risk tolerance can change over time — and it’s important that you feel comfortable with the level of risk you’re taking on when investing.

Keep diversifying. Diversification is always important for investors — by having a mix of stocks, mutual funds and bonds, you can reduce the impact of market volatility on your portfolio. To cite an example: higher quality bonds, such as Treasuries, often move in the opposite direction to equities, so having these bonds in your portfolio, if appropriate for your objectives, can be valuable when market conditions deteriorate. (Keep in mind, however, that diversification cannot guarantee profits or protect against all losses in a declining market.)

A recession accompanied by a bear market is not pleasant. But by taking the right steps, you can increase your chances of weathering tough times and staying on track to achieving your important financial goals.

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