Prime Minister Justin Trudeau warned in a year end interview that 2023 will be a tough year for Canadians.

“Global recession fears, slowing down in the global economy, interest rates continuing to be high, inflation still lingering — it’s going to be tough,” he said.

The International Monetary Fund has called for a short and shallow recession in Canada in 2023.

Inflation, rising interest rates and recessionary fears top the 3 major financial concerns of Canadians this year. Repaying debt is the number one goal in 2023.

A recession is a period of economic downturn spread across several months or years.

During periods of recession, companies make fewer sales, and economic growth stalls or becomes nonexistent.To cut rising costs, organizations may be forced to lay off large portions of their staff, resulting in widespread unemployment. At the same time, hiring slows down, making it difficult for the newly unemployed to find another job. Investments like stocks and real estate tend to react to these events, meaning that retirement and other savings accounts can be volatile. Lenders have already increased their lending requirements making it much more difficult for people to qualify for new credit accounts. Recessions are an unavoidable part of any economic cycle. But you can weather the storm by anticipating challenges early and preparing for the future.

Here are our top 6 tips to prepare for a recession:

1. Reassess Your Cash Flow

The cost of living has skyrocketed and the good news is inflation is easing. If you’re worried about inflation wreaking havoc on your finances, reassess your spending habits. This may result in pressing pause on non-essential expenses.

An important habit that could be considered is to start following a budget.

Now is the time to understand what you’re spending today and to help anticipate what your needs will be over the next six months.

Your budget may need to adapt ahead of a recession. Try to cut down on non-essential spending, like entertainment, cable and clothing. While it's unrealistic to think you can cut out all discretionary spending, it's important to separate wants and needs.

If you don’t have an emergency fund of 3-6 months of expenses in cash, set that as a financial goal.

Ask yourself these 5 questions to take stock of your financial situation:

• How much cash do I have on hand?
• How much cash can I get my hands on quickly, if I need it?
• How much debt do I currently have (credit cards, student loans, etc.)?
• What are my basic monthly living expenses, including food, shelter, health insurance, transportation and childcare?
• Do you have any major life events coming up with significant expenses attached (for example, weddings, a baby or retirement).

2. Pay Down Debt Quickly

Use these strategies to pay off debt faster:

• Make a list of all your debt
• Pay with cash
• Reduce spending
• Pay small bills first
• Double up on payments
• Check bills for the best price possible
• Avoid new debt
• Analyze your behaviour
• Set goals to pay off your debt
• Consider need vs want

3. Invest in Recession-Proof Industries

You may want to consider sectors that generally do well in an economic slowdown. Fear of buying the wrong stock can be mitigated by investing in established well-known businesses.

4. Look for Negative Correlations

Diversify your portfolio by buying asset classes that have low or negative correlations. This can help minimize losses in the short term if investments dip because one asset class will tend to go up in value while the other goes down.

5. Invest During Economic Downturns

An economic downturn is one of the biggest opportunities to build wealth. During these times, stock prices are much lower and can be the best time to buy. Once the economy and stock market recovers are when you will reap the benefits of buying your investments, ‘on sale.’ As Warren Buffet advised, ‘Be fearful when others are greedy and greedy when others are fearful.’

6. Make an Effort to Stay on Top of Your Financial Situation

Preparation is your best defense. Seek the guidance of a financial expert to get advice about how to navigate a difficult economic period and help achieve your goals this year.

A recession is beyond our control; however, we can control how we prepare for tough financial times. Taking precautionary measures now can make a significant impact in the future.

Whenever you’re ready, here’s 1 way we can help. We help high-net worth investors and entrepreneurs to grow and protect their wealth.