How to Recession Proof Your Finances
After years of uncertainty and constant shifts within the economy, it’s always best to prepare for what you have the ability to control. Instead of allowing the world’s happenings to control your finances; take these necessary steps to give you financial security and sanity.
Create a solid plan of attack to pay off credit cards
I know, this is an exercise you’ve done many times before. However, let’s go in laser-focused and eager! One of the best things you can do is reduce debt by any means necessary to prevent being overwhelmed in the future. Start by making a list of all creditors and be sure to jot down all interest rates. Depending on what’s most suitable, you can either build up your momentum and begin with the lowest amount owed or work on the revolving credit with the highest interest rate. While there is no one-way approach, make sure you truly commit to reducing debt as much as possible. Don’t be afraid to set reminders on your phone or post personal notes at home to remain focused. As you see your debt decrease, this will serve as a major boost to stay the course and keep going.
Re-evaluate your budget
We often believe there’s not much room in our budget when honestly, we haven’t taken the time to evaluate how much money we spend per month. Take the time to ask yourself those personal questions. Are there any subscriptions you don’t fully use or get your money’s worth? Are you spending too much on entertainment or eating out? How much produce goes to waste after every grocery trip? Revisit your entertainment or discretionary bucket for these items and transfer the remaining balance to your savings or toward reducing debt. Start where you are with what you have. If you have $50 extra after household expenses, draw a line in the sand there and build upon that.
This strategy isn’t only for those that may be classified as high earners. Budgets aren’t meant to be stoic and unenjoyable; they’re to provide us with necessary guardrails. Think about it like this – you’re driving up a mountain and there are no reflectors, no safeguard railings, and no signs to assist you in what is already a nerve-wracking experience. Your finances are no different. To reach the goals for you and your family, you have to. put parameters in place to help you see things to completion.
Side hustles are the name of the game
Long gone are the days that you’re able to solely rely on multi-billion-dollar corporations to ensure you’re living the quality of life you desire. Unexpected layoffs and workforce reduction are the name of the game and will never come with forewarning. When you think about what you can monetize; consider this: what is that one thing your friends coin you the go-to person for? What is always your responsibility when planning anything for your family or friends?
Any talent or skill that you have can easily be monetized. Leverage social media as an outlet to gauge the interest of others while ramping up your clientele. Remember, this is scalable and can ramp up as slow or fast as you’d like. Various online platforms allow you to create a profile advertising your services. Referrals, word of mouth, and various social media channels will add some extra funds to the places you need it most. Don’t forget to have fun with this and make changes as you see fit! When frustrating moments occur, take a step back and remind yourself of the overarching goal – to create a financially established environment for you and your family, regardless of what happens in the economy.
Boost your emergency fund
For every dollar that fails to be assigned in your budget, your spending habits will indeed do the assigning for you. Please be very intentional with designating a set amount every pay period to beef up your emergency fund. No amount is too small; even if it’s just $20 each pay period – you have to make it a priority and start somewhere. The amount can be increased and adjusted over time as your comfort level increases.
Any windfalls such as bonuses, monetary gifts, income from side hustles, and remaining funds after household expenses are covered can be thrown toward your emergency fund. If you’ve personally reached your goal, it’s okay to establish another! There’s never enough money in the reserves. Having your peace of mind when a family member gets sick, unexpected job loss, or any emergency arises makes all of the short-term sacrifices worth it.
Check your investment portfolio
If it’s been a while, look at your investments, ensure you’re still comfortable with what’s available and make any necessary tweaks. Do you need to make adjustments to match your current level of comfort? Were you more open and willing to risk tolerance in the past and now want to adjust? Ask yourself these very vital questions and be honest.
Avoid incurring any new debt
It’s one thing to pay off debt and a completely different animal to avoid racking up any new debt. If at all possible, avoid opening new lines of credit. You don’t want your hard work to be in vain. Keep this in mind – you’re doing some important work to guarantee that no matter what happens in the economy your finances won’t suffer. If a major purchase like a car or a home is in the near future, you can create an account that’s dedicated specifically to that. Consider saving more over time to decrease monthly living expenses. Haste can get the best of us, but it doesn’t have to. Emotional or impulsive purchases typically don’t align with any financial goal – so make sure you exhibit enough self-control to stay focused on the goals ahead.