I like thinking about the economic cycle. I am currently preparing for the next economic downturn. Today, I will talk about how to prepare for a recession from the perspective of investment.
How to prepare for an economic downturn
Sometimes, we want to prepare for the future, especially when the world’s future is gloomy. There are upward and downward periods. It is not surprising from the perspective of history, even if there is an economic collapse in our lifetime.
It looks like the downside period has already begun. Many strange events are happening, such as wars, climate change, inflation, and global confrontations. Perhaps you can feel it.
One of the biggest social impacts is a recession. In this period, the social majority tends to lose their job or money. Society is in turmoil. There is a lot of anger and sadness because the majority cannot predict or adapt to that environmental change.
We can prepare for it. The next recession will occur within a few years, in my opinion. It might be longer than usual because the current economic boom has lasted longer. In other words, it seems better to prepare more than normal.
However, we sometimes don’t know what a recession is or how to deal with it.
Today, I will talk about how to prepare for a recession. We can reduce waste and improve fundamental efficiency in advance. This wisdom might help us secure wealth and peace of mind.
What is a recession?
First, let me explain what a recession is.
An economic recession is a period when people get more efficient by reducing unnecessary things.
There are two approaches to efficiency: increasing new methods and reducing old, inefficient ones.
An economic boom is a period of trying new methods. For example, assume we want more entertainment. In such a case, we might find new trending enjoyment, such as YouTube, Netflix, or Amazon videos. They are affordable and exciting entertainment, so we subscribe to them.
Many people subscribe to them. That makes those businesses keep growing. More people will get jobs in those fields. People have hope. Perhaps that is why people tend to want only economic growth.
Why does a recession happen?
However, economic growth also creates waste. It causes inefficiency.
For example, we might subscribe to YouTube, Netflix, and Amazon videos but realize we don’t need such many services. We might realize that all we want is to enjoy Hollywood movies. One service is enough. It is more efficient to unsubscribe from unnecessary ones and use that money on something else.
That creates a recession. People reduce unnecessary things. Employment in those fields decreases. Unemployed people increase. They need to move from trending areas to more fundamental industries, but they cannot change their lives soon. The majority lose hope. Society tends to be confused. Perhaps that is why people don’t want a recession.
However, a recession is necessary because it also creates efficiency. Without it, it just adds to the waste. It is inevitable as long as we want a better life.
Preparing for a recession
That tells us how to prepare for a recession. We can reduce waste and create fundamental efficiency in advance.
It is the same as investing. We predict the movement of the majority and move from now.
During a recession, people value fundamental items such as food, water, energy, jobs, or money. They prefer the cheaper ones. At the same time, people tend to throw away gorgeous or luxurious items.
It means that fundamental things become harder to get, and expensive things are easier.
A recession is an opportunity to make our dreams, which cost a lot, come true. Seclusion might be one of them.
Securing the fundamentals of our lives now will allow us to make that possible. In other words, we are frugal when many people waste. We buy when many people are frugal.
Ideas to reduce waste
Reducing the amount of daily garbage is one idea to make our lives more efficient. Garbage is a symbol of our waste. If we manage our resources well, garbage will naturally decrease.
For example, if we like to drink coffee, we can buy a lot at once and store them well. That usually decreases costs and garbage.
Perhaps we need to install new items to store it. Although it costs, that initial investment will lower the running cost.
Investing wisdom to reduce waste
It is the same as investing. I call it “dividends for running costs.” It is a kind of dividend.
Dividends give us small, continuous profits in the long term, although we need to make an initial investment. Dividends for running costs are the same. They give us a cost reduction in the long term in exchange for the initial payment.
Of course, the cheaper the initial investment, the sooner we will have a profit. Reducing costs is one form of investment.
We can invest to increase income and decrease spending. Both are necessary to make our lives efficient. The economy is the same. An economic boom and a recession both make our society better.
Conclusion
To prepare for the next recession, we can reduce waste and improve fundamental efficiency in advance.
It is a form of investment.
This wisdom might help us make a recession an opportunity.
Thank you for reading this article. I hope to see you in the next one.
