Warren Buffett Says This Is the Best Way to Get Through a Recession
- There's reason to believe a recession may be imminent.
- In addition to building up your emergency fund, now's also a good time to build up your skills.
It pays to take his advice to heart.
Is the economy headed for a recession? Maybe, or maybe not.
Not all recessions are created equal, and if the economy does take a turn for the worse, it could end up being a relatively short-lived decline. Or, unemployment could spike and remain high for months. We really don't know.
Fueling the argument for an impending recession is the Federal Reserve's recent actions on interest rate hikes. The Fed has been raising rates in an effort to cool inflation. When borrowing rates go up, consumers tend to spend less. And that's something that's needed right now to narrow the gap between supply and demand and bring the cost of consumer goods back down to more moderate levels.
But when consumer spending declines, it can hurt the economy and eventually lead to a recession. And that's why so many financial experts are warning consumers to boost their savings, pay down debt, and dust off their resumes to gear up for the worst.
But investing giant Warren Buffett has some different advice for coping with a recession. And it's worth taking it to heart during these uncertain times.
It's all about adding to your personal value
It's true that shoring up your emergency fund is a great way to manage through a recession. Similarly, cutting back on expenses and paying off debt could make it easier to cope with job loss or a period where your income takes a hit.
But a really good way to get through a recession is to put yourself in the best possible position to avoid a layoff or a hit to your income in the first place. And in that regard, Buffett's advice is to be really good at what you do and add a lot of value to your company.
Back in 2009, at the end of the Great Recession, Buffett insisted that the best thing to do during those troubling economic times was for people to invest in themselves. And that makes sense.
If you make an effort to grow your job skills, you could become an integral employee your company can't afford to part with, no matter the circumstances. That's a great way to buy yourself job security.
Investing in yourself could take on a lot of forms. It could mean taking courses online, reading up on your industry, attending conferences, or even asking seasoned colleagues for advice and mentorship. It could also mean practicing what you do, and practicing some more, until you're really excellent at it.
Say you work in IT and your company has been rolling out a new database. If you spend a number of nights fiddling around in that database, learning its quirks, and figuring out ways to address bugs, you could become the go-to person for all things related to it. If you're on a team of five IT folks and layoffs become necessary, your employer might have a hard time letting you go -- whereas your other colleagues could end up in a more precarious situation.
Make that investment
We can't say for sure that a recession is around the corner. But it's good to prepare for one just in case. And that could mean following Buffett's advice and making yourself the most valuable employee you have the potential to be.
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