If you tune into pretty much any news outlet these days, you are faced with fears of a potential looming recession.
In fact, just last Friday (June 10, 2022), newly released data revealed that inflation has now hit a 40-year high at 8.6%.
But what should physical therapists and occupational therapists do to prepare for a recession?
This list can help put yourself in a better position should a recession occur:
1. Increase Your Value At Your Job
Working As An Employee
If you work for an employer, learning new skills that bring value to your organization can make you more indispensable and therefore make you less likely to be let go should times get tough.
When I worked at my previous full-time job, instead of working in just one setting, I worked in both in the acute care hospital and outpatient settings.
When COVID-19 pandemic hit hard, the outpatient department closed down. While the outpatient physical therapists and occupational therapists feared for their jobs, the inpatient acute care occupational therapists and physical therapists were over-run with patients to evaluate and treat in the hospital. I saw that the therapists needed help, so I volunteered to temporarily change my schedule to a full-time acute care physical therapist.
Working For Yourself
The concept of bringing more value to your patients also applies to those of us who work for ourselves because knowing how to market your value to your clients/patients is very important for job security.
In addition to my full-time job, I also had my own cash-paying private clients. When the COVID-19 pandemic started, I explained how treating them in their homes helped decrease the likelihood of them being exposed to COVID compared to if they would have to explore other therapy options in the community.
I also educated them on what precautions I was taking to best protect them. To help further reassure them, I would even clean my equipment purposefully in front of them so they could see the steps I was taking rather than just hear me talk about it.
Bottom Line: Increase your value to increase your job security.
2. Increase And Diversify Your Income Streams
What happens to the person who puts all of their eggs in one basket and that basket breaks?
To decrease risk, occupational therapists and physical therapists often hear financial experts advise them to diversity their investments rather than letting it all ride on one single stock.
But why don’t we also diversity the number of income streams we have?
If you rely on only one way of bringing in income, such as your full-time job, you could face financial catastrophe if you were to lose that income stream.
That’s why, before paying off over $350,000 in student loans, I was not only making money from my full-time job but I also had side hustles working for Luna Physical Therapy and by doing prn home health.
After I paid off my student loans, my wife and I welcomed our baby into the world and we decided it would be best if I could spend more time at home with them. Having my other income streams allowed me to quit my full-time job and prioritize family over work.
Bottom Line: Increasing the number of income streams you have can make you less dependent on the money you make from your full-time job.
3. Review And Cut Your Expenses
While increasing your income is very important, cutting costs might be even more important.
It doesn’t matter how much money you make if you spend too much of it you will have a hard time increasing your wealth. That’s probably why one third of Americans making at least $250,000/year live paycheck-to-paycheck.
Here are a few ways you can decrease your expenses:
Cancel Unneeded Subscriptions
I make a point to go through my expenses every month and see where my money went.
When doing this, be sure to check all avenues from which your money leaves you. This can include withdraws from your bank account, credit cards, and mobile payment services you may use like Venmo or PayPal.
Don’t just add up your total expenses – look for recurring expenses and make note of them.
Ask yourself if you recognize these recurring expenses and if they are still important enough for you to continue paying each month. If you do want to keep paying for them, then ask yourself if there might be a way for you to keep these subscriptions but still decrease their costs.
For example, during our maternity and paternity leave, my wife and I subscribed to DoorDash because either cooking or leaving home to pick up food was just asking too much of us at that time. However, once life calmed down a bit, I remembered to cancel our subscription while going over our expenses at the end of the month.
In another example, we had also subscribed to the Hulu plan without advertisements during our maternity and paternity leave. Although we decided we didn’t want to part with Hulu, we did switch from the plan without advertisements at $12.99/month to the ad-supported plan at $6.99/month. This switch saved us $72.00/year and these types of savings add up over time.
Sure, insurance can be considered a necessity, but that doesn’t mean you need to pay through the nose for it.
Shop around and find a better deal!
To help negotiate a better rate, consider
2. Asking for discounts
3. Reassessing what type of coverage you actually need
Decrease Utility Costs
There are many changes you can make to your daily routine that can save you money.
Some of these are as simple as turning off the light in a room you are walking out of or using the air conditioning less during the summer.
But have you thought about saving money by timing the usage of your dishwasher to run during off hours?
We wouldn’t have thought to do this but I called up the utility company and simply asked them if there were ways we could save money and they mailed us a nice picture illustrating what times of day it would be less expensive to run our dishwasher.
So, call and ask your utility companies and ask how you too can save money!
Bottom Line: You work hard to make money – don’t waste it on recurring expenses you may not need or by missing out on discounts you didn’t realize existed.
4. Have A Written Investment Plan That You Are Ready To Stick To In Good Times And Bad
Rarely, if ever, do emotions mix well with making financial decisions.
Having a written plan can help take the emotions out of the equation and keep a level head, especially in difficult economic times.
Your written investment plan should, at a minimum, address the following:
Determine Your Financial Goals
Have you ever thought about your goals in life?
It’s a great place to start when creating your written financial plan.
Treat your goals as the finish line and the rest of your written financial plan as the path that will take you to that finish line.
If you’re worried your goals might seem unrealistic should the economy take a tumble, don’t be.
That path that I mentioned earlier is made up of different categories and if you keep your dollar values in each of these categories realistic then your goals should still be achievable.
Check out each of these categories below.
Your Budget: Start One And Stick To It
Whether the economy is booming or busting, you should always have a good idea of how much money you are bringing in and how much money is going out.
Yes, in the case of an economic downturn, you may experience a decrease in income, but a flexible, realistic budget can help you be ready for this.
That’s why I consider your budget to be the foundation of your written financial plan.
Your Emergency Fund: How Much To Contribute And Where To Keep It
Many financial resources, including Vanguard recommend that you keep an emergency fund with enough money to cover your expenses for at least 3 to 6 months.
But what if you lose your job and you are not able to find another one sooner than 6 months?
You wouldn’t expect that to happen because you have a job in healthcare, an industry that has long provided employees with job stability. After all, rankings like the The U.S. News And World Report’s 100 Best Jobs of 2022 rank physical therapy and occupational therapy fairly high, at numbers 28 and 31 respectively.
So why should you prepare to not have a job for more than 6 months?
For starters, how many physical therapists and occupational therapists do you know that lost their jobs when COVID-19 came to the United States?
Unfortunately, I know many.
Second, even if you believed that you could find a new job should you lose your current job, do you think it is reasonable to expect that the new job will pay you just as much as your previous job?
From your new employer’s perspective, you will be a new hire in an economy currently in a recession, so that probably isn’t realistic. And speaking of being a new hire during a recession, who knows how stable that new job will be.
Not only should you consider keeping more than the standard 3-6 months of expenses in your emergency fund, but you should also be sure to keep your emergency fund in a place that can withstand market volatility.
A place like a high-yield savings account can be good choice.
If you kept your emergency fund in a high yield savings account during this long, exciting stock market bull market, you’ve likely felt at least a little FOMO. While investing your money in more risky places such as stocks during this time may have turned out well, how do you think these investments will fair during a recession?
Don’t risk losing a large portion of your emergency fund should the market experience a downturn. After all, this is the money you want to be able to rely on in times of need.
Your Debt: How To Manage It
Do you have debt?
Well, guess what, you’re not alone.
Debt can come in the form of student loans, credit cards, your primary house, investment properties, or a car, to name a few.
While making the required monthly payments for these loans might be doable now, consider how it might become more challenging should a recession occur and the amount of income you bring in changes for the worse.
That’s why decreasing your financial obligations can make sense.
This can be achieved by paying off debt or by refinancing it.
For example, you may have heard commercials urging you to refinance the loans on your primary residence because the interest rate is historically low right now.
Be careful, though – not all debt is the same.
For instance, refinancing federal student loans can bring about different circumstances than refinancing private student loans. You can learn more about student loan options specifically for physical therapists and occupational therapists here.
Your Investments: Types Of Accounts And How Much To Invest
Your written investment plan should detail what types of investment accounts you will place your money into, how much of your money you will put into each investment, and how often you will make these transactions.
However, a recession can provide you with special opportunities so your written investment plan should also include if and how you may want to take advantage of these circumstances.
For example, a recession can be a good opportunity to move money from a 401(k) to a Roth IRA should this align with your written financial plan.
That’s because you will have to pay taxes on that sum of money. During a recession, since the stock market is down, that sum of money is worth less so you will pay less in taxes.
Bottom Line: Take the time to create a written financial plan and stick to it.
5. Protect Your Financial Stability With The Right Types Of Insurance
As healthcare workers, physical therapists and occupational therapists need to protect themselves from threats ranging from their health (eg COVID-19) to legal threats (eg lawsuits).
While you may think that purchasing the right types of insurance policies can wait, your income can become less stable during a recession. That’s why it’s even more important to purchase these policies now.
Here are the three types of insurance policies every physical therapist and occupational therapist should consider purchasing to prevent potential financial catastrophe:
Term Life Insurance
If you have other people depending on your income for financial stability and you are not independently wealthy, then you need to purchase the appropriate amount of life insurance coverage.
Waiting to do so will only cost you more money down the road, as the older you get and the less healthy your medical history appears over time will make purchasing life insurance more and more expensive.
Term life insurance is the type of life insurance best suited for the large majority of physical therapists and occupational therapists.
Get it now while it’s cheaper.
Learn more about purchasing term life insurance here.
As occupational therapists and physical therapists, we use our bodies to treat patients recovering from injury all day.
But what if our own bodies get injured? What’s the plan then?
That’s why long-term disability insurance is crucial to have.
Much like life insurance, long-term disability insurance is cheaper the younger and more healthy you are so it is best to purchase early on in your career.
Again, get it now while it’s cheaper.
Learn more about purchasing long-term disability insurance here.
Professional Liability Insurance
Protecting your license with malpractice insurance should be a no-brainer, but unfortunately the importance of purchasing a policy still needs to be stressed.
It is not very expensive, but should a claim be brought against you, the payout could be in the hundreds of thousands of dollars.
Learn more about purchasing professional liability insurance here.
Final Thoughts. . .
A recession sounds scary, but if you follow these steps you can be more prepared.
You may even be able to take advantage of opportunities a thriving economy does not typically offer.
Do you have anything to add to this list? What are your thoughts? Let me know in the comments section below!