Preparing Your Family For the Next Recession
Canadians are comparatively fortunate to live in today’s market. According to Global News Canada, borrowers have been able to weather three Bank of Canada interest hikes and consumer delinquency rates – – the percent of non-mortgage loan payments more than 90 days late – – are at a two-year low. Canada is actually on track to record its longest period of economic expansion. In the midst of a prolonged economic expansion; however, the risk for a recession becomes more likely.
So how can you prepare your family?
Here on Ottawa Mommy Club we have written before about how saving money is good practice. From taking advantage of cash back reward programs to paying more attention to your spending habits. In the event of an economic downturn, however, mothers and their families may be forced to get more creative.
In Hamilton Spectator’s article on preparing for a recession, readers are made to understand that any recession will entail a period of job loss and tightened credit requirements. Thus, one tip is implementing a 50/20/30 budget: putting away 50% of your after-tax income for must-have expenses and allocating 30% towards wants and 20% towards debt payment and savings. Giving yourself a certain spending limit is a good way to protect yourself against reduced hours or even job loss.
Another good pre-caution would be to increase your financial flexibility. This can be done by giving yourself means for additional credit. Homeowners can do this by setting up a home equity line of credit or switching to one with a higher limit. For non-homeowners, you can do this by having a number of credit cards and keeping multiple credit lines open and unused. It is also advisable that you prioritize paying off credit card debt, as this can save you money on interest and free up credit for you to use later on.
Of course, investing is always a good option. While this may typically mean buying stocks, Christina Gayton’s Medium article notes how safe haven assets like gold may be a better choice. Gold is a commodity and despite tougher economic times people will still want gold jewelry and decorations, which most of us already have.
Additionally, unlike stocks, investing in gold has historically been touted as a safe haven as it offers stability for traders and investors. In this regard, the gold price chart on FXCM shows how the price of gold has remained strong in 2019, after dropping to as low as $1171 ($CAN 1159.25) in August last year. Much of this increase has been due to the threat of the US/China trade war and the anticipated havoc it could wreak on the world’s two largest economies – the ripple effects of which will no doubt reach Canada. Although gold has its detractors, the precious metal has historically experienced booms in times of economic recession, meaning its best to buy it low during times of economic expansion and sell it off later for a quick profit.
Regardless of what happens with the economy, taking precautions always makes sense. Heeding these steps now could make all the difference tomorrow.