ear Chuck,
I keep reading about experts predicting that a recession is coming. What do you think? Although I am getting ready, what is your advice to help me ride it out?
Getting Ready
Dear Getting Ready,
Of course a recession is coming! They are inevitable; we just don’t know when or if we will even be here to experience it. Our nation has survived recessions in the past. Those who plan ahead typically weather them well, and even come out ahead!
A recession is simply a contracting of the economy or period of correction from over-expansion. Technically it means that the economy declines for at least six months. There is a drop in real gross domestic product, income, employment, manufacturing and retail sales. A rapid increase in the unemployment rate may indicate that a recession is in progress. Other red flags may occur like the current global recession in manufacturing, impacted by the trade war.
Since we know two things – a recession is certain to come and opportunities will exist – I will give my advice according to the 4 P’s.
(1) Plan
Anticipating a recession, we can set goals, make clear plans and escape emotionally-driven decisions made in fear. I like to say that planning is the antidote to fear. Since we have had lots of time to plan, (an unprecedented span of continuous economic growth since 2009), there should be nothing to fear when the correction occurs.
(2) Prepare
* Fully fund an emergency account. Save an amount equal to 3-6 months of salary. Since most recessions last 18 months or less, you probably do not need more than 18 months of your total income set aside in an emergency savings account.
* Pay down debt. If you are burdened with overwhelming credit card debt, get in touch with our partners at Christian Credit Counselors immediately. They can help you get a plan in place so you can pay off your debts up to 80% faster. Thousands of dollars in credit card debt won’t help you weather a recession well!
* Diversify investments. Consider your risk tolerance in the stock market.
* Become valuable to your employer. Read, attend seminars and take classes to update your skills. Work as unto the Lord.
* Create an additional income stream by selling possessions, taking on extra work, consulting, renting out your basement, etc.
In Genesis 41, God reveals the meaning of Pharaoh’s dreams to Joseph with a plan on how to prepare for the future. They would have seven years of plenty followed by seven years of famine. They were to gather and store grain for Pharaoh as a reserve against the years of famine. Pharaoh saved 140% of the grain to prepare for the economic collapse. This goal was reached by saving 20% each year for 7 years.
If you have not been gathering and building your financial reserve, it’s time to begin.
(3) Don’t Panic
Preparation will reduce fear and stress. Let the facts overrule emotions. God is sovereign and completely in control regardless of the economy. So, trust Him, stay or get active in a local Bible-believing church, and serve the body of Christ.
The name of the LORD is a strong tower; the righteous man runs into it and is safe. A rich man’s wealth is his strong city, and like a high wall in his imagination. (Proverbs 18:10-11 ESV)
(4) Be Patient
Recovery from recessions can take months and sometimes years. Try not to dwell in self-pity. Rather, choose to be grateful. Support your church and give to the less fortunate. Stay in the Word and look for opportunities to share the gospel during potentially difficult times.
Rejoice in hope, be patient in tribulation, be constant in prayer. Contribute to the needs of the saints and seek to show hospitality. (Romans 12:12-13 ESV)
Since no one knows exactly when either of these peaks occur, be sure to seek Godly wisdom before buying or selling anything of value.
Recessions are a time to exercise what we believe. Read the Word, pray for wisdom and discernment, listen to the Lord and trusted individuals, and take action.
We should all practice Biblical financial principles whether we experience a recession or not. When we plan, are prepared, avoid panicking and operate with patience, we can minister to those who are frightened and take advantage of new investment opportunities.