My Expert Recommended Strategy for Surviving a Recession: Don’t Panic
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- Instead of stressing out about a recession, I’m taking my financial adviser’s advice not to panic.
- She tells me to keep my hands off my investments.
- I’m also taking control of my spending where I can, starting with my utilities.
My grocery bill is where it hurts the most.
Maybe because it’s a weekly expense, or maybe because if something should be affordable, shouldn’t it be food? My research into why my grocery bill has increased so dramatically led me to a fun new term: stagflation. I love words and when I learn a new one, it goes round and round in my head. I’m in the sixth week with this one.
Stagflation describes a period very similar to the one we are living in, in which economic growth is stagnant and inflation continues to rise. This type of situation often also sees a sharp increase in unemployment. At least we get a fun new hybrid word, right?
Like many people, my knee-jerk reaction to scary messages about the upcoming (current?) recession is to get carried away with the anxiety of it all. I am a naturally concerned (world class) and have had to fight this instinct when it comes to managing my money. I developed tools to help me ground myself in the panic. This is how I am preparing (and not preparing!) for a recession.
Staying the course with my long-term investments
Based on past and present guidance from my independent financial advisor, Liz, in the New School of Finance, I leave my medium-risk and long-term investments in the market, as they are. Hands off! And I don’t look at them more often than necessary. They are struggling, but my timeline of when I plan to access the funds in these investments gives them time to recover.
In other words, my RRSP (Registered Retirement Savings Plan) and one of my TFSAs (Tax Free Savings Account) have experienced a real market crash. I have already lost to them and am committed to letting them recover, rather than withdrawing the reduced funds and placing them more conservatively. (Note that these specific accounts are only available in Canada, not the US.)
A few weeks after my most recent session with my financial advisor, my father called to ask what I planned to do with my investments that aren’t working out. He was concerned about his own retirement fund and wondered what advice he had decided to follow. I shared with him that I planned to stay the course and give my dwindling investments time to recover. Of course, his time horizon for using those funds is much closer than mine. In the end, he spoke to a financial planner at his bank who echoed the views of my independent adviser (don’t get busy!) and mine (stop monitoring them and don’t panic!).
Feeling my feelings on inflation
I am frustrated by the high prices of food, especially with such shortages. My nearest grocery store (one of the major chains here in Canada) is frequently out of major staples and when they do, the prices amaze me.
My gas bill has doubled this year, even though my consumption has decreased. The price of gasoline has gone up, and even though I have made sustainable improvements to my home and more effort to conserve energy, which has led to a decrease in consumption, I continue to pay more. Much more.
I am doing what I have to do to keep my costs down and stick to budget, but I have no control over inflation. Some things cost what they cost, and the prices keep going up. I have a right to be upset about this. You too. But in many cases, there really isn’t much we can do about it.
I’m working on believing this situation is only temporary, but I’m also channeling my anger accordingly: When my bills go up, like my gas bill and home insurance, I call and talk to them about why it’s costing me more. and ask how I can help lower that price. Recent home improvements have helped me save a few bucks on my home insurance payments. It’s not much, but it helps.
Take advantage of government programs to improve the efficiency of my home
I applied for the Canada Greener Homes Grant, which reimburses homeowners for improvements that help increase the efficiency of their home, up to a certain amount per project. As you’d expect with a government program, there’s a lot of red tape and things move pretty slowly, but it’s helping me do projects around the house to reduce heat loss and ultimately save on utilities by subsidizing a percentage of total cost per project.
They are projects that I have on my list since buy an old victorian house in 2020such as insulation under floors, weatherstripping around doors, and installation of new energy efficient windows. It feels good to know that I am improving the value of my home, investing more in my biggest investment, lowering my utility costs, and getting a little money back for doing the work.
My strategy for preparing for a recession? Do not panic. I am intimately familiar with the psychology of money and rely on what I have learned so far to safeguard my finances to the best of my ability and stay sane, even in the midst of all the noise.