The recession is over, but it didn’t give us the light at the end of the tunnel that some had expected. We’re still living with the financial repercussions of the last one, and the new one too.
The global economy is on a fragile footing, and there’s no guarantee that the economic recovery we’re experiencing will last. This means that even if you’re a financial planner, you’re likely having to come up with new strategies to help your clients avoid financial crises. But, what are the best ways to protect your clients’ finances during an economic downturn?
Since the Great Recession, over seventy percent of Americans are living below their means. Minus the cost of your mortgage, utilities, car payments, etc, you’re probably living well below your means. To make up for it, you’re probably taking on debt: credit card debt, student loans, medical debt, and more. Here are some ways you can make up for your lack of discretionary income:
Are you concerned about a possible recession? No one knows when the next one will strike, but history indicates that we may anticipate more in our lifetime.
A recession is defined as a drop in economic activity as a result of lower expenditure. It is beneficial to an individual or family when they decrease their expenditure. However, when everyone does it, the economy suffers.
Job losses characterize a recession, resulting in lower income and a higher dependence on credit cards. Stock prices fall as a result of some individuals selling their assets.
What can you do to make your money more recession-proof? Act now and follow these six guidelines to avoid becoming susceptible when the next recession strikes:
1. Spend Less Money Than You Make
Spending less than you earn is the first and most important step in recession-proofing your finances.
That involves establishing and adhering to a budget. You must keep track of your expenditures in order to understand where your money is going. Also, if you’re overpaying, seek for methods to reduce your expenditure.
“Assist me in getting out of poverty!”
Spending less than you earn is the *only* method to save money. That implies you’ll either need to cut costs or raise your revenue.
We aim to assist you in achieving both goals.
Learn the basics of building wealth at our FREE Simplify Money Workshop. Because your money has no option but to increase if you can spend less than you make. You will increase your savings and reduce your debt.
Plus, there’s more. We’ve compiled a list of free money-saving tips for you:
- How to Cut Your Monthly Bills in Half
- Debt-reduction strategies
- How to Get Started Investing
- How to make an additional $20 each month with a few simple hacks (with no extra effort)
This session will provide you with everything you need to follow the cardinal rule of personal finance: maintain your income higher than your expenditures.
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Capital One Shopping can help you save money.
You’d want to save money, but who wants to purchase less things? Thankfully, there are solutions available to assist you in saving money on daily purchases. The free Capital One Shopping browser extension is one of these tools. Say goodbye to keeping all those tabs open as it automatically analyzes the product across sites to see if you can buy it for a cheaper price. It also uses the best available coupon/promo code at checkout to give you a better deal or cash back. With the mobile app, you can now earn points when you buy in-store at partner shops. These Capital One Shopping credits may be used to purchase gift cards from your favorite stores.
Capital One Shopping provides many opportunities to save money and time. Get the Capital One Shopping app for free and start saving right now.
2. Put money aside for emergencies
You will have money to save if you spend less than you earn. And an emergency fund should be your primary financial objective.
An emergency fund isn’t glamorous, but it provides stability. But here’s the thing: unanticipated expenditures WILL arise. In a downturn, this may entail job losses.
How will you weather the storm if you don’t have at least $1,000 (but ideally a few months’ worth of expenditures) stashed up in a savings account? Is it possible to get credit? I promise you can’t afford the debt if you can’t afford to save. So, what do you have to lose? Now is the time to start putting money aside for an emergency.
Trust me when I say that having money set up for a rainy day is worth the sacrifice now.
Open a CIT Savings Builder Account to Get Started
Your emergency money must be safe and easily accessible. That implies no stock market investment and no CDs that are locked in. Having said that, you still want the best interest rate possible.
Because of its interest rate structure, the CIT Savings Builder account is ideal for establishing an emergency fund. Customers that deposit at least $100 per month or have a balance of $25,000 qualify for the highest rate (the “upper tier”).
To create the account, all you need is $100, and you’ll be rewarded if you save regularly. For the current APY, see the banner below, and establish a CIT Savings Builder account now.
3. Start a Side Business
Having numerous sources of income is a good idea for two reasons. The first is that having more money allows you to spend and save more (I recommend focusing on the saving part).
The second benefit of having numerous income sources is that it provides financial stability and peace of mind in a volatile market. You have a financial buffer AND the ability to continue working while you search for a new career if you lose your full-time job.
You may work as a virtual assistant, freelance writer, editor, or proofreader, or become a blogger (though this is a long-term plan). None of these appeal to you? There are a variety of different options for finding a side hustle.
With the Steady App, you can keep track of your finances.
Are you one of the millions of Americans who like working from home and want to supplement your income? If that’s the case, the Steady app may help you locate freelance employment to augment your income.
When you download the Steady app, it will match you with on-demand employment that match your qualifications. Create a profile and you’ll be on your way to finding employment that fits your schedule.
Some of the advantages of using Steady to find employment include:
- You can work from home.
- When it’s convenient for you, work.
- Look for full-time or part-time work, and
- Apply for jobs that are either remote or close by.
So, what exactly are you waiting for? Sign up for the dependable app, begin applying, and earn some additional money.
4. Get Rid of Your Debt
Debt must be paid off if you want your finances to be recession-proof.
During a recession, any part of your future income that must be used to pay off debt puts you in a hazardous situation. What if you’re laid off? While you change gears, your emergency money and side business may help you. However, if you have a lot of debt payments to make, you’re in danger – particularly if it’s credit card debt.
The objective once you’ve built up an emergency fund is to pay off your debt as soon as possible. However, you must do so with caution. Look for methods to reduce your interest expenses so that your payments may go farther and your debt can be paid off quicker.
With a balance transfer credit card, you may cut your debt payments in half.
If you have credit card debt, you are probably paying 15% or more in interest each year. That’s a bummer since you won’t be able to spend that money on anything else. With a balance transfer credit card, you may be able to significantly decrease your interest expenses.
Credit Land is a website dedicated to helping you discover the finest credit card for your specific requirements. Look through Credit Land for the best balance transfer deal, such as 0% for 18 months. Transfer your current high-interest balances to that card once you’ve applied and been accepted, then pay it off within the time period. Instead of being eaten away by interest charges, your payments will target the principle.
Visit Credit Land to save hundreds of dollars in interest costs.
5. Keep an eye on your finances
Keep track of your money as you begin to put the elements in place to recession-proof your finances. Unless you keep track of your expenditures, you won’t know whether you’re spending less than you make. You can’t put money aside for an emergency fund or debt payments unless you know how much money comes in and goes out.
In a nutshell, keeping track of your money is critical. It’s simpler than ever before thanks to online banking and financial tools like apps and spreadsheets. Weekly or monthly, take a look at your expenditures. Make it a date if you’re in a pair (jk, but only sort of).
Recycling and repurposing
You can’t overlook where you squander money when you track your expenditures. Reduce your purchases by being inventive and looking for methods to reuse and repurpose what you currently possess.
Do you spend a lot of money on cleaning supplies? That old sweatshirt may be turned into a lot of cleaning rags. Do you have any vinegar in your kitchen? To make an inexpensive and efficient cleaning solution, dilute it with water.
6. Make a long-term investment
Last but not least, investing for the future is a proven method to recession-proof your money. Although there are no certainties in the market, money invested typically increases with time. When your money makes money, your net worth rises and you become more financially secure.
You may invest the excess money you discover when you become serious about monitoring your finances once your emergency fund is in place and you have a strategy for your debt. And if stock prices decline, your money will just be used to purchase additional shares.
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People don’t invest for two major reasons:
- They believe they are unable to pay it.
- They have no idea where to begin.
Acorns is a user-friendly (and inexpensive!) investment platform that addresses both issues. You may get your investing account up and running with an expert-built, diversified exchange-traded (ETF) portfolio in approximately five minutes and for as low as $1 per month. Bam!
Acorns can also assist you in locating the funds. Acorns automatically rounds up your purchases and invests the leftover change in your portfolio when you connect your credit and debit cards. You never see the money, but it adds up quickly. You may also set up recurring automatic donations in quantities that fit your budget.
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Recession-Proof Your Finances: The downturn in the economy this year has had a major impact on personal finances. Many have seen their wages stagnate, while unemployment has remained high at about 10 percent or higher. Others have seen their investments stagnate and have had to liquidate some investments to pay off credit cards or other debt. Some are still in business for themselves but find themselves in financial difficulties and are looking to sell their business as a way to raise cash. Others are looking to raise cash through debt consolidation, and some are looking to take on more debt.. Read more about what to do with your money in a recession and let us know what you think.
Frequently Asked Questions
How do I recession-proof my finances?
The best way to recession-proof your finances is to invest in a diversified portfolio of stocks, bonds, and real estate.
What are some recession-proof assets?
Some recession-proof assets are stocks, bonds, and real estate.
This article broadly covered the following related topics:
- how to recession-proof your finances
- how to protect savings from recession
- as a saver what will you do during recession
- recession-proof your retirement
- what to do with your money in a recession