We like to think everything’s going well with the economy. And it might be. But that doesn’t mean that there won’t be another recession. Indeed, you need to prepare your business for the next economic downturn.
However, you also need to make sure your personal finances are properly prepared for the next economic downturn. Without having your finances in order, you run the risk of being stressed out and losing track of your business.
Here are some ideas for making sure you’re ready — no matter what the economy throws at us next:
Diversify Your Income Streams
One of the most important things you can do to be ready for an economic downturn is to make sure your income comes from different sources. Income diversity can protect you to some degree when one source of your income fails.
It’s not just about making sure your business has diverse revenue streams, either. Your personal income needs to come from more than just your business or your day job. Look for ways to shore up your income. At the very least, put yourself in a position where you could make more money if you needed to.
Build Up Your Savings
Don’t forget to build up your savings as you get ready for what’s next in the economy. Depending on your situation, that doesn’t always mean you have to rely on a traditional savings account. You can build up your savings in other ways, including using a taxable investment account — although you have to be careful of lost value during an economic downturn.
Think about where you might keep your assets to grow during times of prosperity, and how you can diversify your investments to include inversely-performing assets that are likely to hold their value during a downturn. With a little careful thought, you can build value in your accounts and prepare for problems down the road.
Keep Your Marketable Skills Sharp
Another way to prepare for an economic downturn is to make sure that your marketable skills are sharp. You might need to adapt to new circumstances or pick up extra work to get you (and your business) through a tough time. That means you need to practice skills that others value. You don’t have to get a degree to keep up with marketable skills. As long as you are willing to remain relevant and versatile, you should be able to find ways to keep bringing in revenue, no matter what else is happening in the world.
Know What You Can Cut
Finally, know what you can cut from your budget in a pinch. When things get tough, you need to be able to cut back on some of your expenses.
In some cases, this about making sure that you are living beneath your means to begin with. For example, my rent accounts for about one-seventh of my income. I could get a bigger or more expensive place, but I like the wiggle room.
On top of that, I also know what I could cut from my budget if I had to. I can stop grocery delivery, and skip eating out once a week if things get rough. Some of my subscriptions could be stopped as well. Figure out what you could do without, starting with the non-necessities, and then going down to what you would cut back on if you had to.
As you look at your finances and prepare for an economic downturn, you can take steps to shore up the situation to avoid problems down the road.