Does having a passive income recession-proof your life?

You're earning passively but don't know if it'll help you be recession-proof in the coming years. Read on to see what you can do to recession-proof your life.

Economists predicted that US inflation would cool off at 8.5% after peaking at 9.11%. They also indicated that we would face a global recession in 2023. It is daunting to know that just soon after a life-altering pandemic, a global recession is soon dawning upon us. Financial stability seems more and more like a distant dream as opposed to something attainable. Just as the pandemic has shown us, having a single job isn’t always enough. It doesn’t recession-proof your life.

You’re recommended to find ways to diversify your income. This means you should have an external income stream such as passive income. There are many ways to earn passive income; we’ve touched on that in another article. However, does having a passive income recession-proof your life?

It ensures financial stability

Having a freelancing business on the side could recession-proof your life

Having another income stream does help to ensure some sense of financial stability. The Covid-19 pandemic has shown us that we can’t always rely on having a single income stream or even one job. Having a passive income means you’re essentially not relying on a single income as your means to live.

Instead of waiting for your boss to pay you every end of the month and living paycheck by paycheck, you could grow your savings and further invest them with a good passive income stream. You won’t have to worry too much about potentially losing your job if your passive income is much higher than your day job earnings.

You still have to live within your means

Just because you have a steady flow of passive income does not mean you could be spending it lavishly. You also need to live within your means. This means that you need to be mindful of your spending and not over beyond what you have. Remember that living within your budget means not raising any further debts. Having a passive income and recession-proofing your life also means that you would have to pay off any pending debts or loans that you may have.

This is because there’s a higher risk of losing your job and being dependent on your emergency fund during a recession. If you live within your means, you’ll be able to save more. This is also reflective of paying off your debts, whereby you won’t have to worry about losing money if you were to rely on your emergency fund.

Your investments could be severely affected

If high-risk investments were part of your passive income stream, the recent inflation might have affected you badly. Some forms of high-risk investments that were severely affected by the recent inflation are cryptocurrency and gold. Those who have previously invested in the crypto market have faced immense losses due to its drastic drop.

While it’s recommended to diversify your investments, you also must be extremely mindful of how volatile your investment portfolios are towards economic changes. If you’re just starting out as an investor, it’s always recommended that you play it safe and start with something less volatile like a fixed deposit account. The returns for low-risk investments may not be as great as high-risk ones. However, you’ll be less likely to face massive losses and jeopardise your passive income if the economy takes another downturn.

All in all

While we recommend that you have passive income or multiple income streams, it isn’t always a sure-fire way to recession-proof your life. Although, it is undeniable that having a passive income will help you survive better in our current economic climate. If you’re looking for a safer way to earn passively, you could opt to become a referrer in Recruitopia. All you will need to do is refer candidates to job openings on our platform and you’ll be able to earn referral rewards once they get a confirmed placement. It’s easy and risk-free.

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