It’s true! In some situations, a recession can actually be helpful to an investor’s financial and/or retirement goals. As any seasoned investor knows, the market can be a volatile place full of ups and downs and of course, recessions. 

As part of the economic cycle, recessions may also offer economic benefits.  A Lakewood, Colorado financial advisor, such as one of the professionals at The Normandy Group, can help you learn more about how recessions can benefit your financial goals so you can better understand the ebbs and flows of the market, and also take advantage of things only a recession can bring. 

Let’s discuss ways to get your financial life balanced. Contact The Normandy Group today!

What is a Recession?

Plainly stated, a recession is a time of negative economic growth.  An example of a recession from recent history is the 2009 “Great Recession” that, among other things, was caused by a period of employment and the subprime mortgage lending crisis and subsequent housing bubble. 

As the effects of the current COVID-19 global pandemic are still not fully understood, preparing for a pending recession may not be a bad idea.  But before panicking and looking ahead with fear, it’s important to consider all the ways a recession could actually benefit the economy. 

Pending Recessions Can Help You Prepare

If it seems like the economy is heading for a recession, that can force some people to take a closer look at their current finances.  This includes taking stock of your assets (both liquid and frozen), debts, and anything else that contributes to your overall financial big picture. 

From there, you can make adjustments as needed such as possibly paying down some debt as well as building up a larger savings account.  While you may be tempted to make drastic changes to your finances (especially investments) that’s what a financial advisor is for.  Having these important conversations with a financial planner on your side can help you take advantage of their expertise. 

Chances are, this likely won’t be their first experience with a recession and are experienced with ways to respond.  If you don’t have a financial planning partner, don’t wait until the economy is in a full-blown recession to reach out. It’s best for your financial advisor to have a good idea of your financial position and your future goals. 

The CERTIFIED FINANCIAL PLANNER™ Professionals and CERTIFIED ESTATE PLANNERS™ at The Normandy Group have experience with bear and bull markets and everything in between.  Life is full of uncertainty.  Our Dynamic Wealth Design goes far beyond financial planning to address all of your financial concerns.

Recessions Can Re-Balance the Economy

It is possible that a recession could level out the playing field for costs on items that otherwise would keep climbing higher and higher, and eventually out of reach for those on low and fixed incomes. 

Think of it this way: Oftentimes, when the economy is thriving and employment rates are high, the prices of everyday consumer goods tend to keep on rising resulting in possible inflation.  When the economy takes a downward turn, unemployment sometimes rises but also so does the cost of producing and distributing goods and services, thus lowering prices for everyone.  Taking advantage of not just the lower prices overall but also of the increased efficiencies that a recession can bring. 

If you think about a recession from a business owner’s perspective – assuming they can afford to stay in business at all – they will likely find ways to “trim the fat” and bring more to their bottom line.  This could be evaluating staff and reducing the amount of liability on their ledger and also finding ways to be more productive with the same resources by streamlining processes and pivoting where needed to stay afloat while riding out the recession.  While looking at this from the consumer’s perspective, these increased efficiencies can mean better prices and better overall products and services. 

Recessions Can Change Your Mindset

As in much of life, changing your mindset when it comes to your financial outlook can make a big difference in meeting your retirement goals.  When a possible recession is looming, or even in the midst of an actual recession, you may be looking for new ways to balance your life and your money.

Sometimes people realize that they can live on less material things, cut back on unnecessary spending and save more for the future.  Recessions tend to also force people to cut back on excessive entertainment expenses and look for more cost-effective outings.  For you, this might mean more time out on Lakewood’s beautiful hiking trails enjoying Colorado’s beauty in a way you maybe wouldn’t have appreciated before.

Take Advantage of the Cycle

As history has previously shown, periods of economic downturn have typically been followed by a recovery and strong market rebound.  With this knowledge, you might make decisions for your investments both during the recession period itself, and when the market rebounds.  This means you’re not simply sitting on your hands and letting the stock market decline, you’re an active player in the game and are able to ride out the cycle with a plan, knowing you understand the lessons learned from previous recessions and can make that knowledge work to your advantage. 

As part of your investment plan, you can also look into the types of industries that historically have seen an increase in sales during a recession.  These industries typically include staples such as toiletries, medical supplies and prescriptions, household goods and groceries.  These are the things people can’t live without, no matter what kind of curveball the state of the economy throws at them. 

Talk to Your Financial Advisor

An important benefit of having a financial advisor is knowing you can pick up the phone or send an email to a trusted financial partner who is looking out for you and your future financial goals. If you have an advisor, make sure they’re prepared to see their clients through recessions and beyond. If you don’t yet have a financial partner, now’s the time to find one!

The professionals at The Normandy Group offer serious financial planning for today’s complex world. By combining tax, financial and estate planning strategies we can help you achieve your goals. Contact us today for a complimentary consultation.