The thought of recession is scary but there’s also a lot of opportunity for you that will come following the end of a recession.
When the economy contracts, people lose their jobs so people spend less so there’s less business all round, couple this with the cost of living substantially increasing along with inflation and interest rates rising, the picture around the globe looks bleak.
I’ve lived through five recessions, during the 70’s, 80’s and 90’s through to 2008 which I’m sure many of you experienced and remember and of course the 2020 recession due to Covid. There’s much talk of interest rate hikes in the UK now, with the interest rate at 1.75%, the highest since 2008 but bear in mind, in the 80’s we saw interest rates at 17% and somehow we survived.
Today, we’ve become used to borrowing money and taking out credit, pretty much for free over the last 15 years and now, at least for the short term, it’s going to cost more.
Analyse Your Expenses
Recessions are of course scary but making a plan and putting it in writing will help prepare you and give you a good idea of what you have to do to steer your way through difficult times ahead.
Pilots don’t start up the engines on their plane, take off and hope they get to their destination. They have a well written, well formulated plan with detailed maps to get them to their destination. It’s important to do the same with your own financial journey.
Need vs Want
In tough economic times, it’s very important to establish your needs vs your wants. A simple example of this is:
I need food, I want a new BMW.
Establish the base monthly cost of all your needs (i.e. what you need to survive). Once you have that, you know what income you must make to cover those needs. If you have any income left, you can decide on whether you have the budget for things that you want but remember, saving any excess income is always a good idea, in good times and in bad.
So, next step, calculate your monthly expenses. For example your monthly expenses may include some or all of the following or some I’ve not included in the list:
- Gym Membership
- Internet Cost
- Mobile Phone
- Monthly Subscriptions (Netflix)
- Car/House/Life Insurance
- Car Tax
- Property Tax
Calculate what you spend each month and analyse where you can make savings.
- Do you really need a Netflix subscription?
- What other monthly subscriptions can you cancel?
- Can you walk, cycle or get the bus instead of taking the car?
- If you can work out at home and go for a run in the park, can you save on a gym membership?
- Are you on the most economic mobile phone and internet plan?
- Call you insurance company and ask if they can help you reduce your premium
- Remote working is now widely accepted in the work place. Can you work from home more often to save petrol and car running costs?
- Switch from premium brands (Heinz) to lower cost, supermarket brands. I never found too much of a difference in them personally.
This winter looks like it’s going to be expensive for us all, with our energy bills likely to increase significantly. We need to heat our homes of course and I’m not making light of the hardships that people will suffer this winter but I’ve had times where I’ve had to wear layers at home, keep a hot water bottle in my lap, drink plenty of tea and sit under a duvet in the evening on the couch, heating the house just enough to keep the pipes from bursting.
We’ll have to find ways to keep our energy bills down over the winter and see what help, if any, the government may offer in subsidies.
Make a Plan
Minimising your expenses is an important part of getting prepared for tough financial times. Don’t waste any money and be conscious of what you’re spending.
There’s many money tracking apps out there now which are a really great way of tracking and keeping yourself accountable with your spending. Have a look at Money Hub, a great app that connects to your bank and credit card accounts and allows you to allocate each transaction to a category and shows you what you’ve spent in an easy-to-see way. Track your spending for a few months and I’m sure you’ll be very surprised how much you spend and what you spend your money on without even realising it.
If apps aren’t your thing then download our spreadsheet that we’ve created to help you keep track of your finances. Punch in your numbers and it will give you an idea of where you stand.
So many people don’t budget or really know what they spend their money on and this can cause many problems down the road.
Once you’ve got a solid idea of where your finances are you can make a plan going forward and this will give you some peace of mind.
Next, take control both of your expenses and your income. How can you maximise your income?
- Is there a side hustle that you can start on Fiverr.com?
- Can you AirBnB an extra room?
- Do you have a garage you could rent out?
Of course you’re here because you’re interested in international trade so is there an opportunity for you to setup as an export agent, find a gap in the market and import products, find a supplier and a buyer and take a commission from each order?
Setting up as an agent doesn’t have to be expensive. Dedication of time, energy and being disciplined are more of the attributes you need rather than cash.
Now the good news…
There’s ALWAYS Opportunity in a Recession
Recessions don’t last forever. Compared with the economic boom periods we’ve become used to, recessions last for a comparatively short period time, perhaps 12 months on average.
With a recession, comes opportunity for you…a lot of opportunity. Let me explain.
1. Businesses Will Go Bust
How is this an opportunity for you?
The businesses that go bust in a recession are the ones that are mismanaged, heavily in debt and/or have out of control costs. These business won’t survive because they’ll run out of cash and can’t borrow any more. With the interest rate rising, so is the cost of borrowing and these businesses can’t afford that cost, so will run on fumes until they have to shut their doors.
Recession gets rid of inefficient, unprofitable companies. This leaves a gap in the market for others to fill.
Other businesses, efficiently run, with a strong financial accounts will survive and they need to keep buying, keep stock levels sufficient and fulfill orders to their customers. Some of their suppliers will no doubt go bust, leaving them in a position where they’ll have to find new suppliers.
This is where the opportunity lies for you. If you know how to source products, find suppliers, negotiate terms, understand how to import products and goods, you can quickly find yourself in the position of replacing a business that’s gone bust.
Remember, when businesses goes bust, the customers from those businesses have to go somewhere else to buy. They’ll go to the businesses that survive, the well-run, efficient companies that keep their costs low. For those surviving companies, their business stands a good chance of increasing, servicing the customers from competitors that have gone out of business.
Don’t be afraid to setup a business in a recession. My colleague Marcus, who some of you may know, setup a web design company at the height of the .com bubble bursting in 1999. Much of the would-be competition was already wiped out leaving him to take on the clients from those companies and grow a successful web design agency for 20 years.
Watch for those gaps in the market and know how to fill them and be ready to setup your own business. Don’t be scared of a recession but instead look for opportunities.
2. Buyers Can Be More Willing To Use Additional Suppliers
Businesses are aware of the economic situation we all face right now and they know there’s a significant risk that some of their suppliers will go out of business. This leaves them in a vulnerable position as they will need to find replacements.
Approaching a supplier now may be much easier than in a booming economic period when things are rosey and wholesalers and retailers aren’t worried about their suppliers disappearing overnight.
3. A Recession Is A Buyers’ Market
During a recession, both businesses and families need to cut costs. They feel the squeeze and they need to generate cash quickly, to pay debts and loans as well as household expenses. In these times, if you’re a buyer, there will be lots of good deals available.
Whether it’s excess stock that a business needs to sell to generate some cash to pay the bank, computers, mobile phones, even vehicles, there will likely be more sellers than buyers, meaning you could be able to pick up some great deals and start a business at a hugely discounted cost, opposed to boom periods.
Third party suppliers such as warehousing services may find they’ve excess capacity and that they’re having a hard time filling this space so may offer a reduced rates for their warehousing services. This can cut your costs as a start up and allow you to grow your business faster, whilst keeping your costs to a minimum.
Plan Ahead: Be Proactive Not Reactive
As any of my students will tell you, my mantra is “Be Proactive, Not Reactive“. This doesn’t just apply to importing a 40 foot container from Vietnam to the UK but in many areas of life, including preparing for a recession.
Instead of worrying and fearing what a recession will bring, literally get your house in order and create a plan of how you will take advantage of the economic downturn. How will you use this to start your own business and secure your own financial future?
Many people all over the world right now and living in fear they’ll lose their jobs. It’s a horrible feeling and a horrible way to live. There’s no “job security” anymore, you have to secure your own future.
The majority of my life, I worked for myself and I’ve been my own boss. It’s not always great. At times, it’s a very hard road to walk alone, there are times when I wasn’t able to pay myself a salary but I was always “Proactive, Not Reactive” and saved when times were good so I could dip into those savings when times were hard.
Nevertheless, I personally have always preferred to have control of my own income and financial future than leave it to the discretion of a boss or manager to decide if I will have a job tomorrow. I always felt this was too vulnerable position and never sat well with me.
Education and Practical Training
The biggest opportunity that people have, is to continue to learn and educate themselves. Get the training you need to further your career goals or if it’s help in understanding your personal finances, there’s plenty of excellent free content on YouTube and the web.
If you’re interested in international trade, ABTS® offers plenty of free, practical knowledge on how to start your own successful business and import and export on both our YouTube channel and our Blog. Spend some time reading our blogs and watching our videos. It won’t cost you anything but your time and you could gain some knowledge and insights that will lead you to an idea, which leads to a new business, which leads to your own secure financial future.
If you want to take things a step further, we offer three online courses that give you the necessary, practical knowledge you’ll need to startup and run your own successful international trading business.
Free Two Hour Consultation
ABTS® is offering a FREE two hour consultation, worth £499, to all students who enroll in any of our online courses in September 2022. If you’ve been thinking about setting up your own international trade business or side hustle, this is an opportune time to do it.
Don’t Just Take My Word For It
I came across this interview the other day with Ray Dalio. Ray Dalio is the founder of the world’s biggest hedge fund firm, Bridgewater Associates in the US, which manages $154 billion.
He’s a self-made billionaire, personally worth $22 billion, so who better to listen to when it comes to advice on how to prepare for a recession?