Dan Lok, King of Closing Shows How To Stay Ahead Of A Financial Recession

When debt is manageable and jobs are stable, financial independence is a likely outcome. However, when markets adjust, significant fluctuations can occur. According to Dan Lok, The King of Closing, preparation is necessary to keep ahead of a financial recession.

What Counts As A Recession in 2021?

A recession happens when economic activity declines. Due to the pandemic and the current outlook of the markets, this can cause concern. Since the economy has largely shut down due to current circumstances, the economy may continue to fluctuate throughout the years.

A recession can be caused by a variety of circumstances including:

Loss of Confidence

A loss of consumer confidence leads to an unstable market because of slow spending. By saving money instead of spending, the economy can start to slow down. It is estimated that 70% of GDP is reliant on consumer spending. With a large drop in demand, deflation can occur. This happens when prices fall and buyers delay purchasing goods.

High Interest Rates and Deflation

When interest rates are high, consumers have an increasingly difficult time buying houses. Without large purchases, companies reduce spending growth plans. This can also cause the economy to slow and cause a deflation

Economic Shock

Economic shocks include situations like the pandemic. This happens when an unpredictable event disrupts the economy. Terrorist attacks and natural disasters are known for this type of recession.

How To Stay Ahead

Strategists such as Dan Lok, predict that prior knowledge can help individuals avoid or decrease the effects of a financial recession. By looking ahead, a financial crisis does not have to cost everything.

Emergency Fund

Start an emergency fund. An emergency fund should be able to cover 6 months of expenses. This includes rent and food. Emergency funds are best kept in a savings account instead of an investment account. By using a separate savings account, this money can be easily designated for emergency-use only.

Assess investments

Dan Lok helps individuals invest in real estate, but there are other forms of investments that will need to be assessed as well. Stocks and mutual funds can easily lose value during a recession. While investments will likely regain value after the recession is over, they will not provide their worth during the financial downturn.

Decrease Interest

Credit cards that carry a large balance often have hefty interest rates. When preparing for a financial recession, it’s wise to cut interest rates by moving the debt to a card with lower rates. By choosing a card that has a low introductory rate for transferred balances, this can be achieved through many avenues.

Network

Diversifying contacts can help with prospective opportunities in the future. By building relationships, job interviews and extra support can help weather the storm. Networking does not have to take place at a designated company cocktail hour and can be done at almost any event. With a wide network, many more possibilities are likely during the downturn.

Avoid Big Spending

Spending money is necessary to keep the economy healthy. Big purchases, however, can be a mistake if a financial recession is looming. Brand new cars or expensive vacations may need to be postponed until the economy looks stable. A period of financial downturn can create uncertainty. Having a little extra money can be hugely beneficial in the long run.

Health During A Financial Recession

Insurance coverage can be tricky when preparing for a financial downturn. Lower insurance rates are recommended during this time, but only depending on the individual’s health. If there are pre-existing health conditions or the threat of health conditions in the future, good coverage is critical. Not only is full coverage important for health risks, but it can prevent one health-related incident piling on top of another.

When there is a health crisis, additional treatment may be necessary. Unlike certain surgical procedures, certain health conditions can spread or cause unknown symptoms. Health-related issues during a recession can be extremely expensive without proper coverage. By visiting a medical professional on a routine basis, further treatments may not be required.

Laser Focus Is Crucial

Surviving a financial recession is often scary. One way to beat anxiety is through accurate preparation. By focusing on what’s important and how certain financial investments can benefit in the long-run can help both mental and financial health.

Changing long-term strategies during an economic crisis is not advised. Before negative impacts from the economy hit, savings is imperative. By cutting back on unnecessary costs, this can become a steady habit. Cutting credit card interest rates, sticking to a monthly or weekly budget, and discount shopping are just a few ways to keep money in the bank.

Side gigs are another way to increase savings. Selling items through online marketplaces can prove helpful for extra income. Gig driving jobs or manual labor projects can also help increase monthly finances.

Know Where You Stand

When planning an effective financial strategy, risk assessment is required. Identifying independent financial risks can include assessing real estate, job security, savings, and number of family members.

By sorting out what is non-negotiable and what can help, a realistic economic plan can be created. While it may be easier to look at the direct impact of financial development now, preparing for the future can make a significant difference.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes