Investor Column | Seven ways to recession proof your finances and survive the coronavirus

Right now, our nation and world has experienced an event that was unforeseen even six months ago. The coronavirus has been recently characterized by the WHO as a pandemic and the cases and fear worldwide have both increased in the past days. With all that sobering news, it is encouraging to see and hear about the prudent choices that are being made by our government and private business leaders to protect the health of our citizens.

Due to the unprecedented travel restrictions, cancellations of professional and collegiate sports seasons, major universities/public school closures, and large and small employers asking their workers to work from home, it comes as no surprise that our economy has begun to contract. All major equity indexes have dropped over 20 percent from their high in February which defines a bear market. Once the equity market enters bear market territory, 80% of the time a recession occurs in the U.S. and because this is a global event, the odds of a global recession also have increased significantly.

Since this economic contraction will become very real to each one of us and many times a very personal event financially, it is important to review the ways to protect yourself from the damage.

Here are seven ways to recession proof your finances:

1. First and foremost is to have multiple streams of income. Think of different income streams as additional walls protecting your castle. Examples of additional income streams include doing business online, generating passive income that does not require a set time schedule to be paid, a side hustle or part-time job, etc. In retirement, consider different ways to generate income with your portfolio including dividends, interest and annuity income.
2. Second, get rid of debt or consolidate your debt. Are you like many people who have a car payment over $550 and a loan over $32,000? That is the average loan amount and payment for 2019. Try buying a quality used vehicle that you can own in 3-4 years at the most instead of the average vehicle loan with a term of 72 months. Another great option now is that over 13 million people can benefit from some of the lowest home mortgage rates in history. You can consolidate bills and/or lower your mortgage payment by hundreds of dollars per month with a new lower rate.
3. Review your expenses and tighten your budget where possible. Do you really need to pay over $150 per month for internet and cable TV? Probably not! Especially when you are already streaming Netflix, Hulu, Apple TV, Disney Plus, etc. Live TV streaming services are as low as $50 per month and internet should be as low as $40 per month. They key is to cut the recurring small payments that add up each month!
4. Know the amount you need in your emergency fund. The standard rule is three to six months of income. Some clients have two years of income set aside. It all depends on your reserves that back stop your emergency funds and your tolerance and ability to weather that financial storm.
5. Keep your business contacts active and continue growing your circle of business connections. That can be a lifeline when your boss asks the office to work from home due to the coronavirus and then decides to downsize until things pick back up again.
6. Never memorialize your losses in your portfolio by selling securities that are diversified and positioned long term for retirement when they are down in value. A long-term relationship with a financial advisor aids in a goal-oriented financial plan which many times removes counter-productive emotions and behaviors when dealing with a down market.
7. Stay focused on your financial goals. Try to review your plans and share it with your family, spouse, children, close friends, etc. When you verbalize your plans, it is powerful to hear yourself say it out loud.

Danny Wood is a Principal and Founder of SeaCoast Financial Partners. To learn more visit MySeaCoastFinancial.com. The opinions expressed in this material do not necessarily reflect the views of LPL Financial. Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

This story was originally published March 13, 2020 at 8:31 AM.