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Weathering the Storm: How to Survive a Recession

July 12, 2022 | Financial Advice

The Covid-19 health crisis shook the whole world. It showed how vulnerable we are. Worst of all, it causes severe financial insecurity, with many Australians losing their jobs in a very short period of time.

You might not have directly suffered from the economic instability brought about by the pandemic. However, you should be aware of the foreseeable recession brought about by pandemic-wrought financial downfall worsened by the conflict in Europe.

With this said, consulting with a seasoned financial adviser can help you to weather this economic downturn and help you develop strategies on how to survive a recession. Even if you have a steady source of income and cash flow, you are still vulnerable to the tide of financial uncertainty. The time to prepare is now. Let us carefully study the ways to lessen your financial exposure.

4 Ways to Lessen your Financial Exposure

Change Your Mindset

First, you need to change your mindset. We have been in denial about the inevitability of economic hardship for far too long. If we continue to be in denial, we will not be prepared when the time comes.

We must start by imagining a situation that significantly reduces your income’s buying power. Although financial advisers cannot change the global economy, they can help you through the economic turmoil. Fortunately, your financial adviser can guide you and provide you with the right tools.

You must understand what you must do to prepare for a financial downturn. It would be best if you put away a certain percentage of your monthly income. Once an economic downturn hits, you will still have enough cash flow to continue your regular expenditures. It would be best if you also avoid unnecessary purchases.

Learn to Manage Your Money

It would be prudent to leave your investments in the hands of financial advisers. However, you should know how to deal with your finances yourself. If you know how to manage your money, you will not be forced to borrow money from your loved ones or financial institutions.

You need to know how to manage your money wisely, as it would be best if you reduce your spending. You must avoid unnecessary expenses if you want to survive the economic downturn. This leads us to budgeting…

Make a Detailed Budget

Budgeting is essential and one of the best skills you can learn and perfect. However, it would help if you were not too restrictive. Although it would be best if you stick to your budget, you must still enjoy your life.

It means that you should not deprive yourself of the things you want. You should be able to enjoy your life without risking your economic status. It would be best if you create a detailed budget, and stick to it. However, you must understand that your budget should be flexible enough to allow you to enjoy life.

You must also follow your budget and not change your budget arbitrarily. If you do this, you will only be increasing your risk of financial insecurity. You should know where your money is going and carefully monitor your finances.

Access the MoneySmart Budget Planner here.

Don’t Panic

Many people panic and in their anxiety, make the knee-jerk reaction to sell down their portfolio. This can be a bad choice if your portfolio has already reacted to the economic situation and decreased in value – meaning that you will realise this loss by selling down.

Whilst recent volatility has been more extensive than usual, it is important to remember that volatility is part of a normal functioning market. When formulating your strategy and risk profile, your financial adviser will have taken future market volatility into account, however uncomfortable it may seem to experience in the short term.

The key in times like this is to stay focused on your long-term investment objectives. If you remain greatly concerned, discuss your options with your financial adviser before making any decisions.

Coastal Advice Group Investment Philosophy

Employing evidence-based investing, Coastal Advice Group has scoured the markets to identify world-class investments and competitive account solutions that are to be used as standard best-practice in our business. The 6 key points are:

  1. Risk + return are related.

Investing means taking risks. Not investing means taking risks too. What’s important is taking risks that you can live with and that get you closer to your goals.

  1. Invest. Don’t speculate.

Our approach is based on Nobel Prize-winning research. We use the data that this research was based on to give you the best chance of reaching your goals.

  1. Diversification is crucial.

Spreading your investments across many different securities and multiple asset classes increases the chance of you having a successful investment journey.

  1. Taxes + costs matter.

While you can’t control markets, you can control the costs of investing and the tax bills. That leaves more money in your pocket.

  1. Investor behaviour contributes to outcomes.

Discipline is under-rated in investment. If you stick to your long-term plan, you give yourself the best chance of achieving your goals.

  1. Consider your impact.

You can do well and do good in the world. Ask us about aligning your investments with your values around environmental and social issues.

Prepare for the Ups… and the Downs

We can never be completely prepared for a financial downturn, but there are things that you could do to lessen your financial exposure. It is time to plan for your financial future; it is time to safeguard yourself from economic turmoil.

To ensure that you can successfully weather an economic storm, speak to the experienced Advice Team at Coastal Advice Group. Clients who adopt our Investment Philosophy can be confident that we will enable you to stay the course through times of volatility and provide the investment returns needed to achieve your goals – meaning you can sleep easy at night and live your best life. Call us or book online to secure your first meeting today!

REFERENCES:

  1. https://moneysmart.gov.au/budgeting/budget-planner

DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.