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What to do in a Recession?

You might have heard that South Africa is in a recession. And for those who listened knew we were on this path after declaring SA a technical recession in 2019.

So what do you need to do in a recession? 

Well,  first thing first. 

What? A Budget? What For?

Yes, a budget. If you haven’t used one before I would highly recommend an electronic one. (For obvious reasons). A budget is used to keep track of your spending, not only limiting you to do fun things. I hear so many people tell me that a budget is keeping ‘FUN’ away or that with a budget they aren’t free to do what they want.?

Well yeah… That is all correct. But they seem to forget the budget is designed to let you know ‘Whoo man, stop buying so much coffee’ or ‘that’s enough Uber eats for the week’. That’s what a budget should do.?

The other thing I would like to point out. If you are a Millennials or Generation Z you probably don’t know where your money gets spent every month. And I don’t blame you, because our school system doesn’t teach basic financial principles.

So the first thing you would need is a budget.?

Photo by?Josh Appel?on?Unsplash

(Don’t know how to create one? Click here)

A budget is a system to let you know when to stop spending money on dumb things. 

Definition According to Google: an estimate of income and expenditure for a set period of time.

So I have a budget… What will I do with discipline??

This is the tough part. Now that you have a budget you need to keep to it.

I really want to expand on this point. 

 – The budget is the rules

 – Discipline is the game 

You can break the rules, but you won’t win the game. 

What is the game? Financial prosperity. Financial Freedom. 6-Month Rainy Day Fund etc.

And no, don’t do scare tactics like ‘if I invested the R8 I spent on a snickers bar I would have R2543.22 in 30 years”. That’s not what I am trying to convey in this blog post. But, if you have a clear black and white statement of each month of what you spent your money on, you would quickly realise that it might not just be one R8 but 20 of them or 10 movie tickets or etc.?

The point I am trying to make is the following. 

Without keeping the discipline, you won’t be able to take control of your financial well-being. 

Done and done – Now Cash 

You probably have heard about the saying ?Cash is King?

Well, that’s actually true in a sense, but why is it true??

The reason why that statement can be true is, in time of turmoil (recession) those who have cash is like a ?king? in the sense that He/She can buy anything due to extremely low prices caused by panic selling.?

In times of great economic stability, You should make it a habit of saving cash, but that doesn?t mean you don?t need to work well with your money when the economy fails. Building up a cash portfolio is crucial.

Photo by?Vanessa Lee?on?Unsplash

I personally am on the path to saving up a six-month rainy day fund I learned from Dave Ramsey. This should be able to cover 6 months of my usual expense.?

For example, You are a bachelor living in a 2 bedroom apartment, living the average lifestyle. Your expenses are R15 000 per month.?

Your six-month fund should be near the R80 000 mark.?

You might be saying this is impossible, but the truth is if you can apply the first and second step of this blog post you will be able to save up this kind of fund. It won?t be easy or quick, but definitely worth it.

Last Step. 

Investing for the Future. 

When you have done the first three well, you will be able to invest in your future self. By knowing what you spend in a month to be disciplined in your sending and saving cash wisely – you will be lightyears ahead of every person living paycheck to paycheck.?

Don?t know how to invest wisely? Click here

Before you just invest in anything, I would suggest you study up on a couple of different investment assets. Find out which was suite you best in the season you are in.?

Photo by?M. B. M.?on?Unsplash

In Conclusion. 

This blogpost isn?t a quick-rich formula or even a guaranteed method. But what it is, is financial literacy. Being well educated to work with your finances wisely to be prepared for whatever the world throws at you. ?

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