Kavan Choksi Wealth Advisor Discusses How to Prepare for a Recession

To prepare for a recession one has to proactively approach their finances. They need to start by establishing a proper budget, doing away with unnecessary expenses, as well as creating an emergency fund. As Kavan Choksi Wealth Advisor says, people should also try their best to pay down debt in order to improve their financial stability, as well as lower their reliance on credit when times are tough.

Kavan Choksi Wealth lists a few tips that can help people to prepare for a recession

A recession implies to an economic downturn that occurs over a span of time when industrial and trade activity goes down and unemployment goes up.  During a recession, there typically is an overall feeling of economic unease among consumers and enterprises. Several factors can trigger a recession, like a decrease in investments and consumer spending, stricter lending policies or even unexpected international economic events.

Here are a few tips that can help people to prepare for a recession:

• Reassess the budget each month: People should review their budget on a monthly basis, in order to identify any kind of unnecessary expenses. If one seems to be spending too much on clothes, for instance, they should consider cutting the spending and go for generic brands over name-brand products to save a few extra dollars.
• Contribute more toward the emergency fund: An emergency fund is a type of savings fund that protects the finances of a person against various emergencies or unexpected events and expenses. As a general rule of thumb, people should try to save 20% of their income.  If possible, people should even consider forgoing additional expenses and save up to 50% of their income. After all, in case of a sudden loss of work, one would want to have enough money in hand to continue paying everyday expenses. An emergency fund should have enough money to meet at least three to six months of expenses.
• Focus on paying off high-interest debt accounts: A looming recession can be a good time to reassess one’s debt accounts and take a note of their outstanding balances and current interest rates. One should try to put as much of their income towards high interest debts as possible, tax-deductible debt accounts in particular.
• Keep up with the usual contributions: If one already has a 401(k) set up, they should try their best to maintain the budgeted contributions even during recessions. While economic downturns do require tighter budgets, not making payments for the retirement fund can have a negative impact on a person over the long term.
• Evaluate the investment choices: Recession brings a sense of urgency and panic. However, one would not want these emotions to impact their financial strategy. Rather, it is better to hold out for potential upswings in a market downturn.

In addition to following the tips mentioned, Kavan Choksi Wealth Advisor says that one should also consider starting a side hustle to bring in supplemental income if things are heading toward a recession. It would also be a good idea to prioritize online and in-person networking events to gain access to better career opportunities.