Most people don’t know that I started my business in the peak of the last economic recession: 2007. The economy shrunk, and jobs were lost…
Everyone was afraid.
But what did I do?
I started a business…
And it worked!
The recession turned out to be the perfect time for my business. Why did I succeed when others failed?
First, let’s cover the basics.
What is a recession?
A recession happens when there is negative economic growth and a widespread drop in spending. So what happens during a recession?
- Business sales decrease
- Unemployment rate rises
- Hiring slows
- Businesses stop expanding
- Social problems increase
Great overview here.
I’ll be honest, it doesn’t sound that great…
But there IS a silver lining!
What I Learned From The Last Recession
Recessions can provide tremendous opportunity!
The biggest ones?
- Creating job insurance
- Boosting your resumé
- Getting prepared for the worst, but hoping for the best
Here’s a real interesting one that you probably didn’t think of…
A study by NPR showed that during the Great Depression, mortality rates decreased in areas where unemployment was the highest!
Now why is that? There are a few AMAZING things that happen when people have LESS money!
- No more money for cigarettes or alcohol.
- No time to go out to your favorite (unhealthy) restaurant, either!
- What about driving? Too expensive!
So if there’s ONE positive thing about recessions… You may live a little longer.
How Do I Prepare For a Recession?
If you’re constantly wondering… “When will the next recession be?”
Then it is probably a good idea to act.
Recession proofing is something I think everyone should do at least once per year. Not only will you FEEL good, but you’ll also be mentally and financially prepared for the next recession.
Here’s the good news: Preparing for a recession doesn’t have to be scary or hard!
In fact, I want you to think about preparing for a recession like annual maintenance or a big Spring cleaning.
The more we prepare, the better.
So here’s how to prepare for a recession:
Step #1: Add Skills
You know what’s free? Learning.
The more you know, the better off you are.
Learning is one of the best ways you can prepare for a recession. Most people talk about cutting when it comes to a recession—cutting spending, cutting debt, cutting unnecessary tasks. And we will talk about that in Step #4. But I actually believe that adding is the most important thing you can do to prepare for a recession.
Specifically, you should add skills to your resumé and professional arsenal.
How do you add skills to your resumé?
First off, know your skills!
Here’s a quiz for you: What is the most important skill employers look for on entry-level candidates’ resumés? Is it:
a) technical skills
d) problem-solving skills
The correct answer?
Problem-solving skills! In a 2017 study by the National Association of Colleges and Employers, employees valued:
- Problem-solving skills (83% of employers)
- Teamwork (83% of employers)
- Written communication (80%)
- Leadership (72%)
- Strong Work Ethic (67.5%)
And there’s something that ALL these top skills have in common…
They fall under the umbrella of soft skills.
So what are soft skills?
Soft skills are the social skills, personality traits, and interpersonal skills used for success on the job. Just like soft-serve ice cream, these skills make people happy!
Learning them can be as big as going back to school or as small as getting more educated in a new area.
Okay, then what are hard skills?
Hard skills are the skills that require a lot of effort but grant you specialized knowledge in a field, such as computer programming or digital marketing. Having at least one or two hard skills is a plus when creating a recession-proof resumé.
The more hard skills you have, the more stuff you can get done in your company.
Every skill you add to your resumé makes you stand out.
Here’s the thing: no one can take knowledge away from you.
No matter how bad of a recession, your knowledge can protect you. But, this might mean squeezing in more learning time:
- Take classes on your lunch break (or watch our YouTube channel!).
- Listen to professional podcasts on your commute.
- Enroll in online professional development classes.
- Read books before bed.
- Take weekend workshops or classes
It’s worth it!
Think of every hour of learning as an investment in yourself.
Step #2: Update Your Professional Assets
The first thing you want to do to prepare for a recession is to get your professional assets in order. This is a great way for you to take stock of what’s working for you and have updated tools ready to go.
Here are the professional assets you should consider updating:
- Update Your LinkedIn Profile: When is the last time you logged into LinkedIn? Make sure your profile is up to date. Add relevant skills, endorsements, and history. I have a BIG list of what to do on your LinkedIn Profile and this is a cheap and easy way to make sure your professional reputation is up to date.
- Update Your Resumé: This is the perfect time to update your resumé and make sure it is fresh. Do you need to add new jobs? Skills? History? You want all that ready to go to craft your perfect resumé.
- Update Your Cover Letter: Cover letters are the perfect way to sell yourself to your potential employer. A 2016 survey showed that 45% of job seekers don’t include a cover letter, so make sure to make a killer self-introduction so you can stand out!
- Update Your Website & Social Profiles: Do you have a website or blog? Now is the time to make sure you are searchable and ready for people to find you. A 2018 CareerBuilder survey found that 34% of employers reprimanded or fired an employee because of content they found online. So don’t forget to check your privacy settings, those change all the time these days!
- Update Your Headshot: You should have a current, professional, captivating headshot. This matters in hiring. Set-up a shoot with a friend or hire someone and get a great shot. Here are tips on how to take a great profile picture and a shot list for your next photo shoot.
- Update Your Portfolio: Now is the time to update your professional portfolio. Get those photos printed! Update and be creative. You want this ready to go.
Step #3: Build Your Network
This is one of the most important things I can share with you to prepare for a recession…
The best insurance against a recession or losing your job is building your relationships. You know what doesn’t lose value? Your network. You know what will always help you? Your reputation.
Here’s the science behind networking:
- Most jobs are made through personal connections. A 2016 LinkedIn study found that 85% of all jobs are filled via networking.
- Job success depends on networking. A 2014 study studied 165 lawyers at a large North American law firm. They found that those who networked had more billable hours than those who avoided networking.
- A study by the Society for Human Resource Management reported that 78% of job seekers said that personal contacts and networking was the most effective job search tactic.
Are you convinced? Now is the time to invest in building your network!
It’s free to do and vital in a recession. Because it doesn’t matter how well you prepare a resumé without the right contacts! Here’s how:
- Reconnect with Your VIPs: Check in with the VIPS you know—old bosses, mentors and other in-the-know folks to say hello. Send them an article you think they might like, to keep the relationship fresh.
- Go to a Meet-Up: Try meeting new people in your industry or a related industry. This can also help you stay top of mind and get inside information on your industry.
- Refresh Your LinkedIn Contacts: Log-in to your LinkedIn and import your email contacts to make sure you are connected to everyone. Go through business cards you have recently collected and add those folks to your online network.
- Go to a Conference, Trade Show, or Workshop: It’s great to stay current on what is happening in your industry and meet the latest folks who could be in your network.
Your goal is to stay up to date on who you know—reach out to people you meet to connect with them further and keep old contacts fresh.
Nervous about networking? Don’t be! I have a great networking guide for you (even for introverts):
Step #4: Cut
Do you know the number one cause of divorce in America?
According to Dan Ariely’s book, Dollars and Sense: How We Misthink Money and How to Spend Smarter, money is also the number one cause of stress in Americans.
So when preparing for a recession, it’s time to cut.
Cut out unnecessary spending and expenses. Sometimes you do not realize that the small purchases are adding up!
Cut the food costs. Did you know that a 2015 Visa survey found that Americans spend an average of $2,746 every year on lunch?
- Pack your lunch instead of eating out.
- Cook on Sundays and buy in bulk to cook all at once.
- Buy protein bars in bulk instead of buying one-off or at vending machines.
- Skip expensive coffee drinks and bring from home or switch to black.
- Plant some vegetables in your home garden.
Cut the tech. A poll by the American Institute of CPAs shows that we spend an average of $166 each month to pay for things like cable TV, internet, phone service, and digital subscriptions!
- Cancel online subscriptions you don’t use (or share with a friend).
- Turn off lights and consider switching to LED bulbs.
- Switch to a cheaper cell phone or internet plan.
- Use a fan instead of air conditioning, or layer up during the cold months.
Cut the other expenses.
- Use coupons for frequent purchases.
- Cancel your gym membership and run outside or lift at home (I love a good arm workout on YouTube).
- Carpool or take public transport.
- Lower the temperature on your water heater.
- Skip the 90% off sales, especially if you’re never going to use it.
- Go to the library instead of buying books.
The key is to start with the small, easy expenses first. They add up and will give you more flexibility later!
Step #5: Save
This is the time to save! And here’s why: A study in the Journal of Consumer Research found that people experienced intense pleasure when they saved money.
If you think a recession is coming you want to begin saving as much as you can.
Think about it this way: You can save for a worst-case scenario to be safe. What if that worst-case scenario doesn’t happen?
You can go on a vacation! (think: palm trees and coconuts!)
Here are some money-saving tips:
- Save the bonus money. The unexpected checks in the mail… the money you get on your birthday and holidays… The unexpected “free” money you get on your tax returns. Save it! The worst thing you can do is go on a shopping spree because it’s just “extra” money.
- Leave the card. A study by the Massachusetts Institute of Technology found that shoppers who use their credit cards spend up to 100% more than using cash! Leave the card at home, and instead bring cash.
- Go mobile. Use a money-tracking app! A study found that participants who used a mobile app to track their expenses reduced their spending by nearly 16 percent! I love to use Mint to track all my accounts and expenses.
- Make a “Ulysses Contract.” In Homer’s The Iliad & the Odyssey, Ulysses ties himself to the mast of a ship, making a “contract” with himself. Making a “Ulysses Contract” with yourself means making yourself accountable for only ONE option in the future. In Dan Ariely’s book, a study was done on participants who had their money deposited automatically. The results? Within a year, their savings grew by 81%! So why not start a contract by setting up your savings account?
Our savings account is called “Rainy Day Fund / Sunny Vacation Fund.”
You never know when you are going to need it.
I highly recommend setting it up with your bank so money automatically goes into your savings each month.
If you are in debt, try one of these 2 debt payment methods:
- Snowball Savings: This is when you start small and target the smallest value debts first. While you may end up paying slightly more over the long term by prioritizing based on amount, rather than interest rate, some people find it more rewarding to rack up a lot of small wins before targeting larger loans.
- Avalanche Savings: In the avalanche method, you start with your highest interest debt, like what you owe on credit cards, and clear it before moving on to your next highest interest loan. Though you may end up chipping away at larger numbers for longer in the beginning, over time, you may save a little more money than if you targeted based on loan amount.
Step #6: Stay Positive!
I want you to stay in a positive mindset, even during times of economic crises.
And I KNOW it’s been overdone, and said many, many times…
But one of the most important things that helped me during the 2008 recession was my mindset. In fact, I believe…
Staying positive is the best medicine for any recession!
To develop a positive mindset and keep going, here’s what you SHOULDN’t do…
- Browse negative news. Browsing the news can cause stress, as well as feelings of anxiety, fatigue, and sleep loss, according to a 2017 study by the American Psychological Association. Further studies in the Journal of Experimental Psychopathology shows that the type of negative news doesn’t even matter—all negative news has been shown to make your own personal worries worse!
- Take the risk. During times of recession, people become more desperate and want short-term payoffs. A 2017 study in Iceland found that immediately after the banking crisis, sales of tickets for several lottery-type games increased! If you’re going to make a big financial decision, be smart! And remember, studies say it’s likely not worth the risk.
- Hang around toxic people. Draining, non-supportive, and difficult people are one of life’s greatest challenges! During a recession, can you recognize the categories of toxic people, such as the Emotional Moocher and Drama Magnet? Yes, we wrote an article on it! Check out 7 Types of Toxic People and How to Spot Them.
Instead, here’s what you SHOULD do to prepare for a recession!
- Learn to reset. How do you remain calm, find courage, and stay strong? I personally love a bit of daily meditation. Did you know that meditation can change your brain permanently? Studies have shown that it just takes eight weeks to increase the grey matter in your brain! We’ve even done our own research on why meditation is so good for you!
- Join a club. Did you know there are amazing clubs you can join called job clubs? These clubs are like Mastermind groups, but help others find jobs. Researchers at Cambridge University found that these clubs lowered people’s risk for depression! And it’s no surprise… I’ve always believed that having strong social support is important when you’re going through tough times. You can even form a club with your friends!
- Be more likeable. Why work on this skill? Basically, highly likeable people are superheroes, and I think you can be one too. Don’t believe me? Check out the research I put together in our amazing article: Be More Likeable Using These 5 Science-Backed Strategies!
Here is the bottom line…
Any preparation for a recession is better than no preparation at all.
Kudos for reading this post!
Now pick one thing to target and do it.
When that is done, come back and grab one more action item. Start with the easy ones like updating your LinkedIn profile or watching some educational videos.
You got this!