During Good Times, Don’t Forget to Prepare for Rainy Days

“A recession is a significant decline in economic activity that goes on for more than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP), although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.” – Investopedia

I have read quite a few articles and watched videos featuring leading financial experts who are discussing the possibility of a recession. White opinion remains divided, the thought that several predict a recession causes me to revisit the idea of nonprofit organizations establishing “rainy day,” or reserve funds.

From USLegal, “A reserve fund is a fund of money created to take care of maintenance, repairs or unexpected expenses of a business.” Having watched nonprofits suffer intensely during the last recession – the magnitude of which we all hope will never be repeated – my advice for nonprofits during this busy year-end fundraising season is to be prepared. Take some of those year-end charitable donations and sock them away into a savings account or other fund where you can get to them easily if and when needed.

Rainy

At the conclusion of this blog post, I include links to a few articles that gave me pause. Having said that, one of my favorite experts, Jim Cramer suggests in an article by Elizabeth Gurdus for CNBC, “Cramer explains the market volatility and why another Great Recession is not in the cards” (October 25, 2018). I hope he is right.

But even if a less harmful recession comes our way in 2020 or 2021, why not be prepared? #JustDoIt

Gold Piggy

Food for Thought

  • Chris Farrell, Next Avenue for Forbes, “Is The Next Recession On Its Way?” (August 3, 2018). “Here are two safe forecasts, the kind you can count on. First, the U.S. economy will sink into a recession. Second, no one knows when the recession will arrive. Taken altogether, these two “forecasts” have critical implications for managing your finances.”
  • Quin Liu, World Economic Forum, “From Economic Crisis to World War II” (November 8, 2018). “As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications. A decade of regular adrenaline shots, in the form of ultra-low interest rates and unconventional monetary policies, has severely depleted their power to stabilize and stimulate the economy.”
  • Chris Morris for Fortune, “Alan Greenspan Warns Investors: Bad Economic Times Are Looming” (December 18, 2018).
Brainy
Thomas Fuller, English clergyman (1608-1661)

I have a primary article on Carolyn’s Nonprofit Blog, “Economy and Philanthropy” that you might also enjoy.

As time moves forward, I continue to add new articles and resources.

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