You think things have changed. We live in a more open society. The last time we heard it we vowed it would never be said again. But the R word is rearing it’s ugly head in Canada again.
The R word I am referring to is Recession, this according to an article/video from Global TV – Bank of Canada cuts key interest rate as economy falls into recession – and by many sources we have been in one for more than 12 months.
(Make sure to go the bottom of this post for a 3 things you can do to help your finances during a recession)
So now what? What can you do to improve your financial life in a recession?
Pay off Your Mortgage/Personal debt
Interest rates usually go down in a recession, so now is a great time to prepay of your mortgage. Yes you can borrow more at a lower interest rate, but this can hurt you once the recession is over and interest rates rise.
Even worse are your credit cards, and personal debt. Rates don’t usually decrease much on credit cards, personal loans or personal lines of credit during a recession. In fact personal debt will take a larger bite out of your income.
Debt is drain on your cash flow, and your lifestyle. Low interest rates are a gift, use it to your advantage and pay down as much as you can.
Recessions can put pressure on stock. Lower like lower interest rates, lower stock prices are also a gift.
Retailers can see sales slump, financial companies under perform and other industries slow in a recession. And as a recession drags on, this can present opportunities to invest a lower prices.
Recessions today make things look bad, and forcing companies to make changes, look for new ideas, and purchase competitors. Once a recession is over these companies can see grow as the economy starts to expand.
Simplify and Save
Looking for a excuse to cancel those cable channels, lower your cell phone bill or other expenses. Use this time as an excuse to get a better deal from your cellphone provider, cable company or credit card company.
Many companies are looking to ways to keep current customers and attract new ones, by offering incentive programs.
Use this to your advantage and revisit your expenses. Then apply the savings to your debt or investment program.
This too shall pass
The bottom line is recessions come and go, just like growth and expansion. What is important is to make good short term decisions to improve long term results.
Check out this Andex chart – 2015 the Big Picture – Illustrates the investment returns of major investment classes from 1935 onward.
Hopefully this Andex chart can help put recessions into perspective, allowing us all to get on with our lives.