The 2008 recession took me by surprise, financially and mentally. Everything that could possibly go wrong, did. I went through several layoffs and struggled for three years to find stability. My credit card debt soared, my student loans were put on the backburner (with higher insurance rates), and I had an unexpected health emergency (sans insurance) that required a trip to the ER in an ambulance. I didn’t take Cobra when my health insurance lapsed, I went into collections on various bills, and I seeped into a deep depression.
Living through an economic recession taught me painful lessons I never wanted to repeat in a future economic downturn. I am sharing my firsthand story so that you learn from my hard mistakes and take my actionable advice.
Diversify Your Portfolio of Skills
At the time the 2008 recession hit, I didn’t have a “Plan B,” but was forced to create one. At almost 5 years into my legal career, the industry tanked. Jobs were not in demand and there were massive layoffs. I began pitching law firms and companies for contract positions and full-time opportunities in law. I also began applying for writing-based opportunities since I was teaching college writing part-time as an adjust professor and had previously taught middle and high school English.
I began juggling my work between writing seminars, per diem writing projects, contract legal work, and other short-term legal opportunities. The work lacked permanency and stability. I didn’t know when my next paycheck was coming or how long it would last. I felt as though I had zero control over my career and life. In fact, my resume was a giant zig-zag from the period of 2008 to 2011.
In the middle of the recession, my parents encouraged me to hang a shingle and start a writing business. I had the background to leverage and market it. So, I decided to create it to bring in extra cash flow and help alleviate my financial turmoil.
5 long years after I founded The Writing Guru, I left the practice of law to follow my writing dreams. I’ve previously shared my story in detail about how I leveraged my law degree to get out of law, and how the diversification of my skills helped me to truly pivot.
12 years after the 2008 recession, I can confidently say that my writing business saved me – mentally, emotionally, and financially.
If you’re in an industry that’s rapidly declining or subject to layoffs as a result of an impending recession, start thinking about diversifying your skills and parlaying them into other industries. Remember, skills are transferable to other industries, but it’s about how you market yourself in order to make that pivot.
Reduce Your Wasteful Spending
In the years and months leading up to the Great Recession of 2008, I was living for the moment, not the future or a potential impact. I spent money recklessly and frivolously. I didn’t think about the possibility of a recession and continued to charge on my credit card. Ignorance is bliss, but not in a financial crisis.
Today, I live frugally and shop infrequently. I have dozens of gift cards that I’ve accumulated over the past few years from birthdays and holidays. If you see me shopping, I’m usually paying for my purchase with one of those gift cards. Every few months, I look at bank statements to see where I can cut costs and reduce wasteful spend. In a time of a recession, frivolous spending and overspending is reckless, particularly where your cash flow is reduced.
Look at your monthly bills and determine necessities versus luxuries. Consider which things you will need versus things you can live without, such as extra cable channels, beauty box subscriptions, various extra memberships, etc. I was the person who was undertaking and thriving on all of the extras. Looking back, I wish I had never taken those unfettered weekend trips to the mall or the lavish Friday night happy hours.
Have a Rainy Day or Emergency Fund
When I made the decision to leave the stability of a consistent paycheck and become a full-time business owner, financial security was a huge driving force in my business practices and entrepreneurial spirit. I never wanted to experience another recession at rock bottom.
How much is enough for a rainy day or emergency fund? Financial expert Suze Orman (who I’ve followed for many years) stresses to have anywhere from 8 to 12 months of savings that you can live off of during times of financial crisis. In fact, that same article I linked above references how difficult it was for people to find jobs during the Great Recession of 2008.
In the first few years of business, I paid off my credit card debt and hunkered down on saving money – diversifying some of it in retirement accounts and others in interest-bearing savings accounts – as opposed to buying items I really wanted or trips I yearned to take. Today, I live as though that money doesn’t exist. I keep it in separate accounts, hidden from the daily eye, so that I don’t just tap into it and buy unnecessary items that will not protect or aid me in a financial crisis. That money is there if and when client work stops coming in and I need to pay my necessary expenses. With the impending recession as a result of the coronavirus outbreak, start taking actionable steps now. Begin reviewing your finances, analyze skills you can market online for remote work (or alternative income streams), and make a list for a “Plan B” work option.