How To Prepare For The Next Recession
If you recall, Nigeria experienced a recession not too long ago, between 2016 and 2017. And some say that the Nigerian economy never fully recovered.
So another recession coming this soon is bound to be disastrous
But the point of today's post is not to stoke up fear but to help us to not only keep our head above water should a recession occur, but to position us for the opportunities that come with it.
The first thing I want us to note is this:
In a recession, cash is King
Unfortunately, cash is what many people do not have in a recession
So, what do you do?
Pay off all debt, if any, as soon as possible. a recession makes your cash more valuable, well it also makes your debt much more unbearable
So clear off any debts that you have now or renegotiate the terms if possible. Start an emergency fund. If you haven't already started, now would be a good time to start an emergency fund.
An emergency fund consists of nothing less than 3-6 months of living expenses.
The unfortunate reality is that most people are going to lose their jobs because most businesses don't have the money to pay staff courtesy of the lockdowns.
So having an emergency fund will come in handy for such people as it will ease the transition period till such persons get another job
Earn more. The only thing better than savings is earning more than you can spend.
Even if you are not in danger of losing your job, it's never a bad idea to get another source of income.
Take advantage of the lockdown period to:
1. Learn a new skill. A lot of companies, within and outside the country, will be hiring part-time and remote workers due to their inability to maintain full time staff. So seize the opportunity. Not sure what skills to learn? Google skills that can't be handled by Artificial Intelligence (AI)
2. Start a side hustle. If this lock down period has taught us anything, it's that all businesses are not created equal. The businesses that thrived during the lock down are pretty much the same businesses that thrive in recessions, aka "essential services"
No matter how bad things get, man will always need food, water, shelter, transport, etc.
You might be thinking "I don't have the capital to start a transport business" or "I don't have money to start a food business". And you may be right...
However, there's something called a "value chain". And if you study the food business value chain, you'll discover that there are opportunities that you can key into without having large capital.
Now I'm not going to explain what a value chain is because I want you to study that for yourself 😉.
Still if running a business isn't your thing, invest in one.
I have a senior boss in Uganda who runs a logistics company. As soon as President Museveni announced a lockdown and a ban on public transportation, the demand for logistics services went through the roof! Luckily, I and a few others were given the opportunity to invest in the business.
Farmcrowdy, Thrive Agric & Agrecourse are some credible platforms that allow you to invest in farms.
Whatever you decide to do, ensure that you carry out your due diligence.
3. Invest. This is a great opportunity to invest in stock.
One benefit of the recession is that you get the chance to buy premium stock at low prices.
Stock like Google, Nestle, Cadbury, Coca cola, which would typically be sold at not less than N1000 per share, could come down to as low as N400.
And if you already own shares prior to this time, fight the urge to sell. You might feel like you're losing money but what you should be doing is buying more shares.
Remember, "Buy low, sell high".
If you'd like to get started on stock Investing, there a number of firms that have simplified the process. Such as:
Chaka.ng, wealth.ng, Bamboo, Rise vest & Kudi financials to mention a few.
Please note that stock Investing is not a get-rich-quick scheme. Those often end in tears Speaking of get-rich-quick schemes...
Beware of Ponzi schemes.
The number of scams and Ponzi schemes typically increase during a recession primarily because Cash is scarce, bills are high and people are desperate to make more money as quickly as possible.
During the last recession between 2015-2017, we experienced a wave of Ponzi schemes all promising to make their victims more money than they had ever dreamed of.
We had: Twinkas, Ebn, loom, ultimate cycler and the most infamous of them all, MMM.
Some of these scams even disguised themselves as "world bank grants" and other business opportunities.
Already, we are experiencing an onslaught of scams disguised as government Corona virus support.
So please be very careful. If it sounds too good to be true, it's probably too good to be true
One of the quickest ways to verify an opportunity is a quick Google search. Is the company registered? What is their track record? Are major/credible news sites talking about this opportunity? Who are the people behind it? And my personal favorite, what do nairalanders have to say about it? If something is a scam, chances are their are tonnes of nairalanders who know about it.
So in summary, in order to prepare for and thrive in a recession, we need to:
1. Pay off debt
2. Start an emergency fund
3. Earn more: Learn a skill, Start a side hustle
5. Beware of scams
If it seems like this tips are common sense tips, it's because they are but then again, "Common sense isn't Common practice". We need to be reminded of the essentials from time to time.
Thank you all for your time, it's always a delight
Published: 18th April, 2020