How to Recession-Proof Your Finances
If the last year of living through a global pandemic has taught us anything, it's that life can certainly throw even the most prepared a curveball.
For many, the last year has been full of financial strife. Between pandemic restrictions, businesses shutting down, or closing, it wasn't just health concerns the pandemic created.
If you felt the financial burden of the pandemic, you might be wondering how to prepare for a recession. What should you do now to be better prepared for the future?
Read on for these tips to survive a recession.
What Does Recession Mean?
You often hear the word recession on the news, especially during the last year. What does it mean exactly though? A recession is a period of time when the economy takes a downturn. The economy's strength is measured by several factors. If there's a recession then:
- Trade and industrial activity goes down
- Stock markets drop
- Unemployment spikes
- Housing market slows
With the exception of the last one, that list sounds familiar to the events of the last year. One of the key problems with a recession, too, is how long it will take the economy to bounce back.
Preparing for a Recession
To be prepared you want to recession-proof your finances. This means you need to do some things to get your financial house in order so it can withstand the hard times with the economy.
Let's take a closer look at how you can prepare your finances for a recession.
Eliminate Debt
When you potentially have less money coming in, you want to have less money going out too. You want to pay down debt to avoid wasting money on interest.
Start by paying down those credit cards with the highest interest rates.
Save, Save, Save
Once you pay off debt and have extra cash flow from those payments being gone, it's time to focus on savings. You don't want to feel like you suddenly have extra money to spend.
Take the money and pile it into your savings. Make sure you have a savings account open. Also, make sure you build up your emergency fund in case you suddenly have a loss of income.
Trim Expenses Wherever Possible
One way to build up savings or even work to pay off debt is by trimming expenses wherever possible. Trim out travel and entertainment spending from your monthly budget.
Consider where else you can cut. Eliminate buying coffee out every morning. Skip the restaurants and take out food.
Stick to Your Budget
It's surprising the number of Americans who admit they don't have a budget. If you're one of them, it's time to make one and stick to you. It will help guide your decision-making when and if you spend money on something.
Consider You, Then Invest and Diversify
Another thing the pandemic taught many people who found themselves unemployed was the need to reinvent themselves. Take time to invest in your own learning and growth so if the opportunity presents itself to get a different job or it becomes necessary, you'll be ready.
How to Prepare for a Recession So You're Ready Just In Case
Knowing how to prepare for a recession can certainly help you weather one when it happens. Making some smart financial plans, recession or not will help have more control of them too.
If you're interested in consolidating some debt or looking for a loan to help you along, we can help. Use Connect to find the right lender for you and your needs.