How to prepare for recession?

1. Create a worst-case scenario
Create a worst-case cash flow forecast. Predict how bad it could be if you lost your job or if your business dropped in sales by about 50%.

2. Build up an Emergency fund
Prepare an emergency fund with enough money to cover at least 6 months of expenses.

3. Have a consistently rebalanced investment portfolio
This ensures that you lock the capital gain of certain asset classes when it is booming.

4. No matter what field of your profession, always strike to be the best
Always strive to be the best. Avoid becoming redundant or “fat” in your company. If you do not prove your worth, you will be the first to be led to the exit door during a recession.

5. Diversify your income source
Please beware if you are in a business that serves just 1-2 major customers. You will be at a great risk during a recession. For employees, work out some forms of alternative income besides the main employment.

6. Know your funding sources and manage the relationship properly
Another way to prepare yourself for a slowdown is to know your funding sources and manage the relationship properly. Remember, when funding sources tighten they do so selectively and this applies to their sources of business as well as the credits.

7. Learn to live on less than your income
You may see pay cuts in your job during an economic recession, so look now for ways to trim your budget as much as possible.

8. Last resort - compromise on your lifestyle
When everything doesn’t seem to work out for you, go for the last resort: try reducing your lifestyle dramatically. Sell that luxury car. Move to a smaller house. Cut down on expensive dining.