A lot of people say that they experience fear when learning about economic crashes and recessions explains Peter Decaprio. It is important to know that just because you are afraid it doesn’t mean that you need to ignore the signs or not take action. Instead, it is better to be prepared than caught by surprise. However, many people don’t know how to go about doing so. That is where this article comes in. We’ll explain some ways on how you can prepare for an economic recession before it occurs so that you can minimize your losses when the time comes.
Put Your Money in Safe Place First things first:
If a recession does occur, then there’s a huge chance that banks will close its doors while others may go belly up during the crisis. And since they are not open, you will not be able to make transactions and get your cash easily. For this reason, it’s best to keep all your money in a safe place such as under the mattress or inside a home safe at first.
You should also consider keeping some of your money outside of banks for emergency purposes. You can put some in an FDIC insured account so that if any mishaps occur with the financial institution you choose, then at least you still have access to your funds.
Once things die down, you can go back to depositing your money into accounts again but if possible try transferring them into another bank or credit union just in case another crisis comes around again.
Do Not Engage In Over-Optimism
Many people tend to over-optimize everything especially when it comes to their personal finances. For example, many people are very confident that their bank will not go under even though there is a high chance that they will. Or perhaps while the economy does well today, you might feel very confident that it won’t take a dump tomorrow which could lead you to make some bad financial decisions because of your confidence. So if possible avoid being too optimistic about things says Peter Decaprio. Always remember what happened in Japan back in the 90s where the market went up for 6 years straight only to crash 8 years after. Nowadays, economists still think about whether or not Japan has recovered from its economic crisis yet.
So if possible, try being more pessimistic especially when it comes to your investments. That way you won’t be caught up in all the hype that causes people to make bad decisions based on their over-optimism.
Take Advantage of Tax Breaks
The government tries its best to stimulate the economy by giving out tax breaks whenever they want so if there’s a good time to get some assets, then you should definitely do so during this period. For example, take advantage of any deductions or credits being offered during tax season which could reduce the amount of money owed for taxes while increase the amount that’s refunded back to you. Experts say that many Americans are not aware of these tax breaks while others fail to take advantage of them every year no matter how small they are because either they did not know about them or did not want to bother getting the forms.
Reduce Your Spending When Taking A Loan Of course, it is important to get a loan before an economic crisis occurs but it’s also equally important not to do so when times are good. For example, you can take advantage of low interest rates by getting a loan whenever they are offered. However, if things turn bad in the economy then you might have trouble repaying your debt once it becomes due. That’s why experts recommend reducing your spending before taking on any new loans regardless of whether they are secure or unsecured. Because based on this advice this will keep you from being surprise when things go south with the economy while keeping more cash for yourself instead of giving some of it away to your creditor explains Peter Decaprio.
Write a Personal Financial Plan
And finally, the last step you should take is also the most important one. Which involves writing out a personal financial plan. This could be in form of an actual plan itself or just jotting down notes on your phone. What your options are once things start getting really bad in the economy. You can even do things like selling some assets for quick cash while paying off debts that have high-interest rates first. So you don’t get with more than what you can handle during times of crisis.
By following these steps, you can quickly prepare yourself for an economic crisis even when things seem like everything’s fine and dandy says Peter Decaprio. They won’t make the crisis go away but they will definitely help you manage it better once it shows up which could save your assets from being too much in jeopardy.