The headlines don’t seem to be changing month after month, “A recession is coming” is a common phrase you can see all over the internet. When you look at the P/E ratios of stocks in North America right now it’s clear that the prices are definitely a little inflated over what they’ve been in the past.
Is this cause for a recession? Probably not, maybe that’s just a new norm that the market has reached and there will be more growth and an ever growing valuation on companies that outgrows their earnings for the rest of time – or a few years at least.
When people are referring to the recession on the horizon, they aren’t just talking about stock valuations though, they’re also talking about trade wars, elections, interest rates and unemployment rates reaching inflection points. Could all of these things be signs of a coming recession in 2020? Perhaps. Perhaps not. Who really knows?
If you’re someone who’s a believer that we are in fact headed for a significant downturn lets have a look at a few things you should be doing in your life to help yourself prepare for such a time.
Know your job market!
First off, which industry do you work in? How is your company performing? If there are lay offs how likely do you feel your position is to be targeted?
These are all questions that you should definitely get familiar with and try and come up with how secure you feel in your current job should things take a nosedive.
Keep in mind that you may be mislead in your beliefs of just how secure your job is, so a little preparation even for the most confident employees could go a long way.
Know your holdings!
If you believe that we are mere months away from a downturn, now really is the time you should be going through your portfolio and understanding ALL that you are invested in. It’s time to take a look at your pension plans at work, as well as whatever mutual funds, stocks, ETF’s that you’ve invested in on your own.
Look at how these funds have performed in previous downturns, did they lose 10% in 2008? or was it closer to 50%? Are you okay with either of those outcomes?
Closing out 2019 could be the time that you sell off a few of those holdings that you’re just not quite as confident in as you could be for whatever the reason may be. For us, we do have a couple holdings that we aren’t 100% on, but they hold such small weighting on our overall portfolio that we feel comfortable holding them through whatever is ahead of us.
Assess your emergency fund!
It could be time to look at your savings, a lot of people tend to stay almost fully invested, and it’s definitely hard not to be fully invested when you’re seeing the types of returns that we have for the past decade.
But, now could be the time to really hammer down on that savings account and getting that 3-6 month rainy day fund in place – you’ll thank yourself should you ever need to dip into it.
For us, we like to keep about 6 months of expenses saved. What we’re working on now is also saving a little bit of additional money up for investing that is separate from our emergency savings so that if there ever were a downturn we’d have a little head start on getting in on the discounts.
Take a look at monthly expenses!
This is a big one, and just this year we were able to save ourselves hundreds of dollars per month just by talking to a few of our service providers to see what they could do for us. These include:
– Phone Bills : This is a big one and yet it’s so easy! Simply call your provider, and some of the competition in your area and see which deals or promotions there are for you. Once you’ve got one you like talk to your provider and see if they’ll match. If not, see ya!
We were able to switch companies and save ourselves $70 per month for an even better package!
– Insurance : It’s definitely worth it to go have a talk to your insurance provider for your house, cars and whatever else you may have insured. It takes a few minutes (at least in our case) and we were able to get a 5% loyalty discount just by having a conversation. This worked out to about a $20 per month savings.
– Cable/Internet: Again, just a simple call to your provider and some of the competition and you’ll be amazed at how easy it is to get promotional rates. We spoke to one competitor and came back with the information to our provider and were able to secure 50% off for a 6 month term before returning to our original pricing. It won’t make us millionaires but it’s a win nonetheless.
Wrap Up
These are just a few things we feel would be beneficial to everyone regardless of whether they feel a recession is coming or not, and it’s never a bad time to start being just a little more diligent with your money habits.
Have we missed anything? Let us know in the comments below or on Instagram @FindependenceCanada and we’ll be sure to get back to you.
As always these are just our own opinions and should not be taken as financial advice, please contact a professional before making any big changes to your personal investments.
Thanks for stopping by,
FIC.