While it’s natural for people to be wary when a recession is looming, that’s not to say that there aren’t opportunities to be had. In fact, if you put your mind to it, you can not only feel more financially secure but you can even make money under the circumstances.
Here’s what you need to know about making money during a recession.
What is a recession?
Usually, GDP rises and average incomes also rise when the UK’s economy is healthy. GDP, also known as Gross Domestic Product, is the value of all the goods and services produced in the UK.
A recession is a period in which a country’s economy shrinks and GDP falls. When economists identify this trend, it’s usually a sign that financial hardship will be felt across the country. The UK is said to have entered a recession at the end of 2023.
When economic growth is healthy, it usually means there are plenty of jobs. Companies can afford to hire more people and pay them well. However, when a recession rolls around, people have less security.
Economic growth allows the government to spend more on public services, cut tax rates and more. When a recession is in full swing, these options aren’t available in the same way. Unemployment may rise and as a result, people spend less, which in turn can have a knock-on effect on other businesses. Much of the population will find themselves with less disposable income as a result.
The lack of certainty around job security during a recession is why it’s important to diversify your income if you can.
How?
So, how can you increase your income streams?
Long-term investments
Traders can tap into recession trends and use them to their advantage. Stocks and shares are more likely to fall, so some traders buy them while they’re cheap in anticipation of an eventual rise in price. You can search for suitable assets using a reputable online investment platform that has multiple channels.
Similarly to the concept of diversifying your income during periods of recession, it’s important to diversify your investments too. This means investing in a range of markets and sectors so that if one goes in a direction that’s out of your favour, another will help to neutralise the impacts. The right investment platform will allow you to do this with ease and offer helpful analysis functions.
Some experts suggest investing in consumer essentials that receive more attention during a recession, such as food, drugs and medical supplies.
Protecting your savings
Financial stability in a recession also comes from protecting your assets and savings. The last thing you want is for them to depreciate. Some people choose to invest in stock indices alongside building their savings accounts where possible to keep savings healthy. Remember, it could be worth switching to a new savings account as different banks offer incentives and varying interest rates, which means you could earn more interest on the money you save.
Real estate
Typically those with investments in real estate do well during a recession. Lots of assets lose their value during these periods, whereas real estate holds its value and often increases. Whether you invest in real estate or real estate shares, it will be a worthy investment in the long run.
Selling online
Second-hand platforms have blown up in recent years. This is largely down to people securing items for less, embracing more sustainable ways of shopping or selling items to generate another source of income. Often, it’s a mix of all three. People tend to spend less on luxury goods and other items in favour of cost-effective alternatives during a recession. You can sell anything you no longer need, from clothes to old devices to make money.
