5 Simple Steps to Prepare for a Coronavirus Recession Income Investors 2020-03-19 05:24:11 coronavirus recession recession Are you worried about a coronavirus recession? Here are five steps you can take right now to shore up your finances during this tumultuous time. Investment Strategies,Recession https://www.incomeinvestors.com/wp-content/uploads/2020/03/a-man-and-a-girl-sit-at-a-desk-in-the-office-and-do-business-analysis-office-work-teamwork-calculate_t20_knpE3r-150x150.jpg

5 Simple Steps to Prepare for a Coronavirus Recession

Worried About a Coronavirus Recession? Try This.

Economists no longer consider a coronavirus recession just a possibility; it has already started.

For proof, you only need to look out your window. Restaurants have closed. Highways remain empty. Airplanes sit grounded.

And things will likely get worse before they get better. Health experts predict more San Francisco-style shutdowns as the coronavirus spreads. The plunge in consumer spending will mean millions of layoffs and bankruptcies. Analysts predict that auto and home sales will soon grind to a halt.

Listen, people have good reason to be scared. Any one of us could receive a positive COVID-19 test. That means two weeks of self-isolation in the best-case scenario. And with entire industries shuttering, employers will hand out pink slips like confetti.

So what can people do to prepare for a downturn?

Now is the time to take proactive measures to shore up your finances. You want to act now to ensure the financial safety of both yourself and your family.

I have outlined my coronavirus recession action plan below.

1. Assess your financial runway. First, tally up all the cash you have on hand or savings that can be converted to cash quickly, such as money market funds. Second, estimate how much income you’ll receive in unemployment benefits in the event you lose your job. If you freelance or own a business, estimate your reduced income as work slows. Finally, put a number on how much money your household spends each month. These figures will allow you to assess how long you can survive in a crisis before running out of money.

2. Build an emergency fund. Many people believe they can survive on credit cards or lines of credit during a recession. That’s not always true. Banks often dial back lending during a downturn, exactly when you need access to cash the most. Every household should aim to have three to six months of cash in the bank.

3. Slash your expenses. Comb through your budget and look for opportunities to save further. Can you replace trips to restaurants (I suppose it’s only takeout nowadays) with home-cooked meals? Do you really need that magazine subscription? Can you find opportunities to save on home and auto insurance or use a less expensive Internet package? If your emergency fund looks skimpy, now might be a good time to pause retirement contributions. Every dollar you trim in expenses now adds more time to your financial runway.

4. Stop paying down debt. Pay the minimum possible on credit cards, personal loans, and other debts. Use the extra cash flow to top up your emergency fund. Anyone looking to become wealthy should aim to get themselves out of debt eventually. But right now, your focus should stay on immediate survival.

5. Don’t change your investments. We live in an emotional time, and emotional times lead to bad investment decisions. Just ask anyone who panicked in 2009. Now is not the time to make bold, all-or-nothing decisions like calling the market bottom or selling off everything for guns and bullion. Smart investors stick to their strategy and pick at selective opportunities if they have funds available.

The good news? This pandemic will pass.

Once we get a vaccine or cure approved, business activity will explode on pent-up demand. A flood of cheap credit will trigger a boom in auto and home sales. Never mind Donald Trump’s $1.0-trillion stimulus package—a number so big I can’t even wrap my head around it.

We just need to hunker down and get through a difficult few months.

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