Tips for managing your money during a recession. Survival guide.
Managing your finances during an economic slowdown can be easy if you take the proper steps before the recession begins. Whether the economy is in a recession or not, it doesn’t hurt to prepare in advance.
Think about it this way: if you are ready now for things such as losing your job, you’ll be prepared for anything that comes your way. Like a fighter ready to defend yourself from an unforeseen fight, you’ll be ready to fend off the punches of economic turmoil.
Currently, Americans are sitting at $14 trillion in debt. And many people are a couple of paychecks away from losing their homes or resorting to credit cards to pay for their necessities. A recession would only make things worse.
If you want to be prepared before the recession hits, this article will give you some great ideas you can put into practice. Then, even if there is no future recession, you’ll also increase your financial discipline and money in your pocket.
Money moves you can make to prepare for a recession
Get a side hustle to boost your earnings
In uncertain times, a side hustle can be a great way to boost your income and help weather the storm of a recession.
There are already 44% of Americans working a side hustle to make ends meet. Whether you’re freelance writing, doing odd jobs for neighbors, or selling services online, a side hustle can provide much-needed extra cash. And that extra income can be vital during a recession when jobs are scarce, and bills are piling up.
Of course, starting a side hustle takes some work. But if you’re willing to put in the effort, it can be a great way to make ends meet during tough economic times. Plus, who knows? Your side hustle might even turn into a full-time business someday.
So if you’re looking for ways to make ends meet during a recession, consider starting a side hustle today. It just might be the best decision you ever make.
See also: 15 Semi-passive income ideas for beginners.
Adjust your monthly budgets
During a recession, it is also important to take a close look at your budget and ensure it is working for you.
This is when families start to feel the pinch of financial difficulties, so it becomes even more significant to ensure that your budget is accurate and up-to-date.
There are a few things that you can do to improve your budget:
First, make sure that you are including all of your expenses in your budget. This includes things like groceries, utility bills, car payments, and insurance premiums. If you are not sure how much you are spending in specific categories, track your spending for a month so that you can get an accurate picture of where your money is going.
Second, review your income and ensure that it accurately reflects what you bring in each month. This may require getting another job or working overtime if possible.
Finally, make sure that your budget allows for some flexibility.
During a recession, there may be times when you need to spend more money than usual due to an unexpected expense. Having some wiggle room in your budget will help you avoid going into debt when these situations arise.
Related: No-Nonsense Guide To Modern Money Management
Learn new marketable job skills
In today’s economy, having a wide range of job skills is more important than ever. During an economic downturn, businesses often cut back on staff and expenses, resulting in layoffs and reduced hours. When this happens, those who can adapt and learn new skills will be more likely to weather the storm.
It’s so important to have a skill that is in demand. If you have a skill that is in high demand, you’re much more likely to find a job even during an economic downturn.
For example, employers are now looking for candidates with strong communication and interpersonal skills.
With the rise of social media and other digital platforms, employees need to communicate effectively with customers and co-workers.
In addition, employers are also looking for candidates who are comfortable with change and can adapt to new situations quickly. Indeed, has a great article showing what employers value in candidates.
With the rapid pace of technological change, employees need to upgrade their skill sets.
Finally, employers are also placing a greater emphasis on teamwork and collaboration. As more companies adopt collaborative workflows, showing that you work well with others is critical.
If you have been in the job market for a few years, find out what related job skills you can obtain to make yourself more attractive to new employers or get a raise with your current one.
Reassess essentials vs. non-essentials
The old argument of wants vs. needs. Even without a recession, discovering the difference between necessities and stuff you happen to like is essential when it comes to handling your finances.
Unfortunately, mastering this skill takes time. Lucky for you, we have an entire article devoted to help you declutter your expenses to improve your financial health.
Start by making a list of all your current expenses, both fixed and variable. Make sure to include things like rent or mortgage payments, utility bills, transportation costs, food, and clothing.
Next, evaluate each expense and decide whether it is a want or a need. Necessities like housing and food are needs, but things like cable TV or expensive clothing may be classified as wants.
Once you have identified your wants and needs, you can start to make changes.
If you spend too much on non-essential items, cut back or eliminate those expenses.
You may also need to make lifestyle changes, such as eating out less often or downsizing your home. These changes can be complex, but they can help you save money during a recession. In addition, living with your folks can save you tons of money that can be invested..
Become indispensable at work
While there is no sure way to predict the future, there are some steps you can take to help ensure that your job is safe.
One of the best things you can do is to build a strong relationship with your boss and co-workers. This means being a team player, going above and beyond when asked, and being someone people can rely on.
Additionally, it’s essential to stay up-to-date on your skillset at work.
If you’re seen as an expert in your field, you’re more likely to be valuable to your company and less likely to be replaced by someone else.
Finally, don’t be afraid to network. Knowing people in your industry can help you stay on top of changes and trends and may even help you find a new job if needed.
Taking these steps can help increase your chances of having a secure job.
Mindset upgrade: Skills to Create an Abundant Mindset
Stash more cash in your emergency fund
Another vital thing to do during a recession is to increase the amount of money in your emergency fund.
An emergency fund is an account you use for unexpected expenses like car repairs or medical bills.
During a recession, there is an increased risk of losing your job or having your hours reduced at work.
If this happens, having an emergency fund will help you avoid going into debt while you are looking for new employment.
Most financial experts recommend having enough money in your emergency fund to cover three-to-six months of living expenses. If you do not have an emergency fund, start by setting aside $50 per month until you reach this goal.
Make sure this money is only used in case of an emergency, so it’s crucial to think in advance about what makes an emergency.
Tutorial: How To Save For An Emergency Fund Properly
Avoid panic selling your stocks
It’s no secret that many people lose faith in the stock market and other investments during difficult economic times. The natural inclination is to “panic sell” to avoid further losses. However, this is often the worst possible thing you can do.
When everyone else is selling, prices are at their lowest, so you’re likely to get far less for your investments than you would have if you had held on to them.
Also, panic selling can cause you to miss out on the rebound that often follows a recession. Instead of selling off your investments, taking a long-term view and riding out the rough patches is important.
Over time, the market has always recovered from even the deepest recession, so it’s important to stay patient and stay the course. By doing so, you’ll be in a much better position to weather any future economic storms.
Keep saving despite an economic downturn
One of the most important things to do during a recession is to save more money. If you can find ways to reduce your expenses and increase your income, you will be in a much better position financially.
One way to do this is to cut back on unnecessary spending. For example, if you normally go out to eat several times a week, you may want to consider cooking at home more often.
Another way to save money is to reduce your entertainment expenses
Related: Lazy Ways To Make Money.. For example, if you are spending a lot of money on cable or streaming services, you may want to consider cutting back or eliminating them altogether.
Continue investing in your retirement
Investing during tough economic waves can be tricky, especially if you have taken a hit on your earnings. Even so, if you continue investing in your retirement during a recession is the right thing to do.
One option is to dollar-cost average into index funds. This technique involves investing a fixed sum of cash into security or securities at set intervals, regardless of the price.
By buying these securities over time, the buyer reduces the effects that sporadic changes, unrelated to the underlying fundamentals of the investment, might have on the price.
It’s essential to learn how to invest in your 20s, 30s, and 40s, this article from R.J. Weiss, a certified financial planner, explains it well.
Another option for investing in retirement accounts during a recession is to focus on quality companies with a history of weathering economic downturns.
These companies tend to have strong balance sheets and generate consistent cash flows, providing them with a cushion to weather tough times.
Finally, investors can look for stocks that are trading at bargain prices due to the sell-off in the market.
By taking advantage of these three strategies, investors can continue to invest in their retirement accounts despite a recession.
Managing your finances during a recession can be difficult, but it is essential to remember that there are things that you can do to help ease the financial burden. Saving more money, improving your budget, and increasing the amount in your emergency fund are ways to manage your money during a recession and come out ahead financially when the economy improves.
So don’t panic – with a bit of know-how and effort, you can weather this storm and keep your finances in check. What tips have you used to manage your money during challenging times?