Many economists are predicting the onset of a recession in the next few years. This uncertainty could wreak havoc on your own personal finances if you are not adequately prepared. Here are four proven solutions to help you to protect your assets against economic uncertainty.
Money experts suggest that building an emergency savings account can ensure that you will be able to weather the storm if you happen to lose your job during an economic downturn. The general rule of thumb is to save enough liquid cash to cover at least three to six months of living expenses. To determine this amount, add up all of your fixed bills and expenditures. Having this cash on hand will help you to avoid having to go into debt if you should find yourself without adequate cash flow.
Keep a Little Gold
Experts agree that precious metals are a strong hedge against inflation, as their value tends to survive economic downturns. Gold generally performs well during recessions and other times of economic crisis. This is why financial experts recommend stocking up on gold during the good times. When an economic downturn hits, this precious metal will likely retain its value and will usually even gains as investors race to dump stocks.
Invest in Mutual Funds, Not Single Stocks
Specialists recommend that investing in mutual funds is an ideal way to manage risks and to guard against steep market downturns. Rather than placing your investment dollars in risky single stocks, the stable nature of mutual funds equips these savings to guard your money while other investments may be losing ground. During an economic downturn, it is especially important to weigh the risk versus the reward. While you will not likely see a large gain in your investments in mutual funds, you also negate the risk associated with stocks.
Get Out of Debt
Debt is a significant threat to financial security even in times of economic strength. Debt can become truly crippling when the economy falters. Making a committed effort to paying off debt now will help to protect your financial assets should the economy go south. Once you have paid off your debt, you can then begin directing that money toward your emergency fund or retirement, building wealth along the way.
Nobody can predict when economic uncertainty will hit. This is why it is vitally important that you take the necessary steps now to protect your assets and to guard your wealth.