Individuals on fixed incomes, essential service providers, investors, young adults, renters, and businesses with lower opportunity costs thrive in a recession. Let’s look at how and why this group of economic recession-proof elites hold on throughout or succeed despite a recession and beyond. You just might be one of them.
1. Folks on Fixed Incomes
During a recession, prices for goods and services tend to be lower. Prices drop, and individuals on fixed incomes, such as retirees, can make their income last longer, potentially increasing their spending power. People on fixed incomes can benefit from lower prices during economic contractions.
Not everything becomes cheaper; prices for groceries and utilities remain stable. However, the demand for certain goods and services can decrease, leading to lower prices.
If you are on a fixed income, you may be able to benefit from many new lower prices, such as for reduced real estate and non-essentials like travel and entertainment, for example. The entertainment, hospitality, leisure, and tourism sectors are among the hardest hit during a recession. This occurs because people tend to spend less on entertainment, dining out, and travel. Instead, many choose to enjoy entertainment at home and opt for staycations instead of expensive trips.
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2. Essential Service Providers
Utilities, healthcare, consumer staples, and industries that provide essentials we can’t live without do well during a recession. People will always need these goods and services. In healthcare, medical professionals and related businesses experience continued demand. Utilities like electricity, water, and gas continue to stay stable due to people’s ongoing need for these. Grocery stores, for example, remain strong and enjoy a steady flow of business.
Other industries that thrive in recession are those that supply the goods and services we can’t live without, which include: accountants, financial advisors, auto repair and maintenance technicians, home maintenance stores for do-it-yourself projects, home-staying experts, rental agents, landlords and property management companies.
As for the business of leasing, renting is likely to be a more appealing housing option. Bargain and discount stores will thrive as people reduce spending on luxuries and seek more affordable products. Lastly, businesses with government contracts for infrastructural products that the government uses to boost the economy will remain stable.
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3. Investors
Recessions present excellent opportunities for investors to buy assets at lower prices, potentially leading to future gains when markets recover. Investors may have opportunities to acquire companies or assets at discounted prices during a recession. By continuing to purchase assets, they can lower their average cost per asset.
4. Young Adults
A recession gives young adults a better opportunity to invest at a lower price. This means it makes investing seem more within their reach. Since they have little savings, they are not risking as much during an economic downturn. Earning and investing during a recession could lead to building significant wealth in their future.
Likewise, parents investing for their children during economic downturns can do and give more. Parents can match their children’s Roth IRA contributions, for example. These financially savvy steps may not seem like much, but they add up and enable parents to give their children a significant advantage toward becoming wealthy adults.
5. Renters
Even though renting may become a thriving recession investment, landlords still need to fill their properties with renters. Recessions give renters some negotiating power, nevertheless. Renters can get lower lease terms, extend lease terms, or even bargain for rent reductions. Landlords during a recession may be more willing to work out a deal. Renters will reap the benefit since landlords don’t want to worry about more vacancies.
6. Businesses with Lower Operating Costs
During a recession, operating costs may be lower for businesses. This helps them save money. As a result, they may increase their profits.
If you are in one or more of these six recession-proof groups, you will fare well during a recession and beyond. But many things that seem like a benefit for one group are only partially so or have a catch in terms of costs or investments.
The essential service providers remain reliable regardless of economic fluctuations. This is valuable information to consider when selecting a career. If you are choosing a new career, these are examples of stable jobs for the future. If you are not content in your current career, you may strongly consider one of these industries if you are looking to make a career change. There is significant value in saving for challenging times, such as a recession that can last anywhere from two months to 18 months. Those who are frugal savers and do not unwisely risk always come out on top.
Being a saver in an economic recession is for those who can give up non-essentials without being tempted by life’s “little luxuries”: a latte, a lipstick, or a short-term comfort over a long-term investment like a house, a car, or a child, all things that can feel too far out of the reach of affordability during a recession. Spending on luxuries within reach can make living during a recession palatable.
We tell ourselves that we can’t afford the big ticket items, but as long as we’re broke, why not treat ourselves? It is not frugal, nor does it make common sense, but it is some people’s way of surviving or even thriving during a recession when they know they do not fit in as a (platinum card-carrying) member of one of the elite six described above.
Doing without becomes easier when you treat yourself to a small luxury item. With each month that the recession endures, we struggle to keep our heads above water (bottled and “Earth’s finest” water from Fiji, if you please). We elevate our economic experience beyond our means while satisfying our irrational, sacrificially accessible, impractical wants. It distracts us from the rising costs of essential items, which we cannot avoid. While non-essential luxuries may appeal to our brand-conscious and consumer-driven sensibilities, they often conflict with our tight budgets during times of economic recession.
For those who risk, have the means, and are willing to sacrifice stability, there are increased entrepreneurial opportunities. These include: real estate, consumer staples, and savvy investing. Those in essential services or with substantial assets will not suffer hardship in a recession.
