For many people, most of whom have heard the words recession from many sources, the word has been associated with many things, fragility, loss, and in extreme cases, poverty. No one wants to be poor, but very few think about how to make money in a recession.
There are of course good reasons why you have to be worried. Fragility is not good, especially when it is not just about one individual or a group. This concerns the economies of countries and other countries and nation-states dependent on them for survival.
As much as we resist the idea of occurrences like this taking place, they do take place, and often without warning. Essayist, scholar, and mathematician Nassim Nicholas Taleb is famous for speaking about two concepts which are “black swans” and “anti-fragility.”
While we may not be able to predict black swan events and make economies recession-proof or antifragile, we can do our best to prepare and plan for them. To give the readers a foundational understanding, some concepts will be addressed briefly in this article.
This article discusses recessions, the implications of recessions, and how to make money in a recession. Do read on.
Table of contents
Introduction
There have been recessions, and one of 2021 or years to come will not be the first or the last. During recessions, countries shrink due to their inability to sustain certain aspects of their economies again. Great things start small, and the Great Depression of the 1930s is evidence of that.
According to history.com “the Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939. It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors.
Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid-off workers. By 1933, when the Great Depression reached its lowest point, some 15 million Americans were unemployed and nearly half the country’s banks had failed.”
If you read that, you would realize that it could quickly get bad. The hope is not to inspire fear but to create the proper gauge level of awareness that keeps you from experiencing unnecessary horrors and pivots you toward learning how to make money during a recession to offset bad days.
You are not covered
So whether the president announces, like in the USA, that nothing is going on but that there will still be funds released or bailouts, it does very little for you, except you are rich. In that case, good luck to you; you stand a fairer chance of survival than 70% of people walking the planet.
An article by Mother Jones titled “The Bailout is Working – for the Rich” states that “the economy is in free fall but Wall Street is thriving, and stocks of big private equity firms are soaring dramatically higher.”
So if you don’t happen to have mega shares in Wall Street, you are better off reading on to discover ways to make money in a recession while others are losing it.
What is a recession?
A recession is a significant decline in economic activity that lasts for months or even years. Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.
If an economy is in recession, an economic stimulus such as Fed rate cuts and tax rebates can be provided without much concern about inflation since recession always kills inflation.
Here’s why: because people have less money to spend, businesses cannot easily raise prices, especially if consumers are forced to spend even more on food and energy.
The difference between a recession and a depression?
During a recession, GDP growth slows for several quarters in a year before turning negative and there are also significant drops in critical economic indicators such as income, employment, manufacturing, and retail sales.
Depressions last for years and not quarters, and during that period, GDP is negative for more than half of those years.
In an economic depression, there is a shrink, and sustained drop in many economic indicators as economic output falls drastically. The effects of depression are felt for decades.
The major difference between a recession and a depression is that a recession is a phase of the business cycle whereby there is a contraction. This contraction is expected as when business activities peak, things must drop.
While depression is a prolonged period of economic recession, depressions are longer and far more devastating than years of recession.
Black swans and antifragility?
Nassim Taleb describes a black swan as “an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility.
Second, it carries an extreme impact…. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”
He, also using the understanding of what black swans are, described antifragility as “benefitting from disorder.”
He explains, “Some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty… Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile improves.”
Your ability to become antifragile during a recession is what is being discussed.
What Is a recession stock market?
To understand what a recession stock market is, you need to understand what happens whenever there is a shake in the stock market. The market responds negatively by abandoning anything that they can consider risky, most especially during a recession.
During recessions, investors tend to sell riskier holdings and move into safer securities, such as government debt. This is because recessions tend to lead to heightened risk avoidance on the part of investors, who run for cover at the sight of risk they don’t need.
A recession stock market is a market that becomes available when those who want to avoid risk sell off their stocks on the market and others buy them up. This could be a good thing or a bad thing, it depends on who is asking.
The good thing about recessions is that they always give way to recoveries sooner or later. Enter the recession market with that understanding.
What does it mean to be recession-proof?
To be recession-proof is to prepare yourself to not be undone when the effects of recession start to bite hard on the populace.
Like the biblical Joseph during the great famine of Egypt, who foresaw the famine years ahead and prepared adequately for those years, to be recession-proof is to be like Joseph.
While you may not be able to stop a recession from happening, you can prepare your boat from being rocked badly no matter how long the recession lasts.
At work, become more valuable. In case there is a downsize and workers are being laid off, it doesn’t affect you. You can also work on updating your resume and improving your skills so you can fit even into bigger roles.
At home, start by lowering household expenses, cushioning emergency savings by bulking them up, selling off things you don’t need, and getting ready to assist those family members.
If they are literate and have access to the internet, send them a link to this article, so they prepare themselves for situations like this.
15 ways to make money during a recession
During recessions, antifragility suggests that you get better as things get worse. Making money during a recession is a great way to go about that. Here are 15 ways to make money during a recession;
#1 – Sell off unwanted things
This may sound like something you should know, but it is important to remember it. During a recession, you should cut away all things that don’t add much value to you again or things you think you’ve passed.
Those things you no longer need are things that others would love to have. Sell it off to them and recover some money for yourself.
#2 – Keep your job
During a recession, it is important to not lose sight of what puts money in your pockets. Your job is primary, and you should ensure that you keep it. You can even offer to do more and help around. This may help keep you on a job when others are being let go.
#3 – Move into survival mode
During a recession, your mindset needs to change; making money starts from there. Now more than ever is when you need to adopt the principle of “spend less, earn more.”
Before things get pitch-black out there, you need to find a way to move your mindset and that of your pocket to know things are not the same again.
#4 – Make more
Honestly, you need more. This is the time you need that extra money you usually ignore. As offers come, pick those ones that don’t encroach on the time you spend on your main job and work on them.
The more you make, the more you realize your potential to make more money.
Which business or extra income you make may or may not stick with you even after the recession is over. Whichever you choose to do, do not rush into it. Think smart, long, and hard before you proceed.
#5 – Save
You may be wondering how. I know. Just have it at the back of your mind that even during a recession, you can still save. Out of the little you make, save.
All the money you make should not go into survival. As the famous words in a popular book said, “a percentage of what you earn is yours to keep.” Remember that.
#6 – Downsize
This may be time to downsize. While you cut down on spending and sell unwanted things, you may have to reduce some household things that you do not need.
Things like your cars, your house, and office space. Are there cars that you don’t need but need to be maintained? This is the time to sell or rent it off for income. If you have more space in your home than you need but still have to pay for it, you may have to sell that house and get a smaller one or leave that place and rent something smaller.
If you have more office space than you need to pay for, this may be the time for you to sell off that space and get something smaller or move to a smaller rented office space.
#7 – Change or adjust the course
If your source of income is threatened and may soon leave you out of a job, you don’t have to be a victim to learn what to do. This may be the time to switch courses.
You can decide to learn something else that has prospects of being profitable. Some skills are more in demand now or businesses are getting traffic now. You may need to look into doing business in another industry.
#8 – Plan ahead
To be recession-proof is to prepare not to be undone when the effects of recession start to bite hard on the populace. Like the biblical Joseph during the great famine of Egypt, who foresaw the famine years ahead and prepared adequately for those years, to be recession-proof is to be like Joseph.
While you may not be able to stop a recession from happening, you can prepare your boat from being rocked badly no matter how long the recession lasts.
At work, become more valuable. In case there is a downsize and workers are being laid off, it doesn’t affect you. You can also work on updating your resume and improving your skills so you can fit even into bigger roles.
At home, start by lowering household expenses, cushioning emergency savings by bulking them up, selling off things you don’t need, and getting ready to assist those family members who are not as recession-proof.
If they are literate and have access to the internet, send them a link to this article, so they prepare themselves for situations like this.
#9 – Involve everyone
Are there those in your household who are old enough to earn an income? Get them involved and help them see the importance of putting heads together to get the right results.
Help them understand that their involvement is in the interest of the household. An African proverb says “if we all urinate together on one spot, it foams.” Take out of that what you will.
#10 – Don’t go into bad debt
A recession is the wrong time for you to borrow for things you do not need. The only reason to borrow is for a proven business that needs a fresh cash inflow to grow bigger than it is currently.
#11 – Save on taxes
Do not dash the government money unless necessary. Anything that can help you keep more of the money you pay as taxes should be followed, save evasion. Find a way to reduce the amount you pay in taxes for your income, house, car, and any other things you can think of.
#12 – Invest
This is the time to invest. There is much to say about this; as I have explained earlier, the recession market is in a frenzy. After thinking well and hard about what you are about to do, this may be the right time to buy those stocks that have sold off and are available to buy for cheap.
This requires you to ask yourself what kind of investor you want to be and your risk tolerance level. Whichever you decide to do, invest with focus.
As much as you are investing in the stock market, invest in yourself.
#13 – Go liquid
A recession may not be the right time to leave money with banks or in the hands of people you may not be able to collect. Cash keeps you afloat when boats are sinking. Take cash, as this ensures that you are more protected from systemic failures than those who do not have cash with them.
#14 – Buy-up
A recession may also be a good time to buy up some other small businesses that are at risk of closure. Buying over new businesses and the infusion of cash into those businesses may be needed to keep the business and the former owners afloat. That way, you save lives and good businesses and make money all in one go.
#15 – Take a leave / Retire
Aha. Have you been postponing your leave over the years? Are you one of those who do not take breaks? You may not realize it, but you may need to take one now. Take a break to learn something enhancing or to rest and wonder about life.
A retirement is also an option. Retire and go home to yourself, your wife, and your kids. You may be at the age where you can no longer do the things you used to do before. Just go home and rest. Don’t break down trying to break your record. A healthy life is a wealthy life.
To be recession-proof is to prepare yourself to not be undone when the effects of recession start to bite hard on the populace.
A recession is a significant decline in economic activity that lasts for months or even years. Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time.
Conclusion
There is always good news. Stay positive. In a recession or not, stay positive. Recessions are not the end. This article about how to make money during a recession may not cover all you want to ask, but it teaches you a lot you should know.
Recommendations
