Recessions come and go. The best you can do is be prepared to take them out.
- Recessions are an integral part of the business cycle. They can also be painful for the average consumer.
- Today, reworking your family budget is a good first step.
- Now is the time to consider other sources of income that will help you through the tough times.
Look, we’ve had a crazy few years. It’s safe to say that few of us emerged unscathed. In addition to worries about a global pandemic, we have had to contend with inflation and a beating drum of analysts saying a recession is near.
Whether analysts correctly predict a recession does not matter. What matters is that you know you’ve done everything you can to prepare. That way, when another recession hits, you’ll be prepared.
1. Rework your family budget
Few of us like the word “budget”. Yet your family budget acts like a financial GPS, reminding you which direction you need to go and when you’ve strayed off the beaten track. If you don’t have a budget, it’s easy to create one that works for you. If you have a budget, review it.
What can you cut? Even though we are years away from the next recession, it is to your advantage to reduce your expenses. The less you waste, the more you save. Here are a few things you can check out today:
- Auto and home insurance: Don’t assume that the company you’ve worked with for years always offers the lowest rates. Call and get some quotes. Don’t sound like an advertisement here, but you could save hundreds a year.
- Lawn service: If you’re paying for a full menu of lawn care services, decide if there are a few you can handle yourself. For example, you may still want someone to mow, but you can handle the fertilizing yourself.
- Races: There are apps available that will help you identify nearby stores that have the best prices on the items you need. Even if you only save $25 per week, that’s $1,300 per year.
2. Focus on high-interest debt
High-interest debt (like credit cards) and horribly high-interest debt (like payday loans with annual interest rates over 400%) are the enemy when it comes to time to protect yourself and your money. This snowball calculator will help you figure out how quickly you can wipe out high-interest debt by paying them a little more each month.
3. Boost your emergency fund
With all you have to do, building an emergency fund can seem impossible. While we don’t suggest doing this overnight, see how much you have left over after paying your bills each month. Let’s say it’s $200. Is there a way to dedicate at least $100 to your emergency savings account?
The idea is to have enough money set aside to cover your monthly bills if you lose your job, get sick, or can’t work.
If you’re not sure how much you should have in an emergency fund, this calculator can help. And if you’re extremely anxious about what a recession would mean for you, you can boost that emergency fund a bit more. If you never have to delve into it, it’s a win-win.
4. Consider alternative revenue streams
Honestly, few of us have time for extra work. But what if you could spend time doing something you love and get paid for it. For example, if you play the guitar, there are plenty of people who would like to take lessons. If you paint, you’ll probably find a group of people who want to learn how to turn a blank canvas into a work of art.
The thing is, everyone has some skill, whether it’s playing chess or baking cupcakes. Look for a way to monetize something you enjoy doing.
5. Get help if needed
If you find yourself deeply in debt, your credit is depleted, and you don’t know how to rebuild, there are organizations designed to help you get back on your feet financially. For example, the National Foundation for Credit Counseling (NFCC) is a nonprofit organization that connects you with an NFCC-certified counselor who will help you create a plan to deal with your existing debt.
You can’t control when the next recession hits or how long it will last. However, you can take steps now to protect your assets in the event of a recession.
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