If you’re wondering why the stock market dropped suddenly today think about a time you were driving and saw a police car at the next intersection. You hit the brakes right?
Well the stock market did the same exact thing today. Investors were reacting to several warning signs that a recession may pull the economy over and ruin the fun we’ve had so far. But as we all know if we see that police car up ahead we can act to prevent being given a ticket. For all of us now is that time.
Without going into details (yet…), here are five things you need to do to be prepared:
- Have a six-month emergency fund. You should be able to pay all your living expenses for six months with cash or cash equivalents. Above all this is the most important factor in coming out of a recession with your head above water.
- Be aware of your retirement time frame. Are you retiring in the next year or in the next thirty years? If your time frame is sooner, then you may want to consider safeguarding your retirement assets in something that will be largely immune to stock market fluctuations.
- Think about your risk tolerance. Are you the kind of person who will obsess over the ups and downs of the stock market for the next few years or can you calmly ride it out? If you find yourself constantly checking your investments then maybe it’s time you realized that you may be making emotionally driven decisions that do not help you achieve your financial goals in the long run. There are other options.
- Do you have excess cash available to invest? Imagine walking into a Nordstrom and everything is 20% off – that’s the way savvy investors see a recession. Not as a threat but an opportunity – as long as they have the assets to invest. Is there something you can be doing today to ensure that you will have something to invest when a recession does hit?
- Evaluate your employment situation. Are you employed in an economically sensitive sector? Would a global recession affect your company to the point that they may lay off staff? What are your alternatives? Are you investing in yourself so that you can easily transition to a new opportunity? Now is the time to think about having a side-hustle.
Right now, the best investors in the world believe that a recession is coming soon. It’s time to start getting your financial house in order. If you have any questions/comments/concerns we would love to talk to you!