According to all major news reports, the US will be faced with a recession for the rest of the year. Whilst going through a recession is beyond our control, we can prepare for a financial recession by taking measures before this downturn occurs.
Here are our top tips on money saving to survive the next recession:
Become Increasingly Frugal
In order to get to a level of savings reasy for a recession, it is important to save more money. Learn how to do more with less and decrease your expenses where possible. Instead of eating out 6 times per month think about only going out 2 times. If you own more than one vehicle then perhaps try to work with one. Look at all areas of your outgoings to decrease your spending and you will be ready when the recession arrives.
Have an Emergency Fund
During times of economic recessions many people will lose their employments meaning the set income isn’t coming. It is important to have enough savings in place that if you lose your job or business fails that you can survive for at least 3-6 months. This emergency fund will give you a safety net not only financially but also mentally meaning that the fund will give you peace of mind. Calculator.me has some useful savings calculators that allow you to plan income, budgets and expenses.
Create a Budget & Pay Debts
During a recession it is important not to have high debt payments each month. With this we recommend you create a budget and make a plan to pay any debts. Whilst those high debt payments might be easy to pay now, losing an income can quickly make it more difficult. Having a budget will help maintain focus and identify areas of expenses that can be decreased or removed.
Relying on one income source can be fine for the majority of the time but in times of economic downturn this is a risk. Losing you job and having other income sources will quickly put pressure on you financially. Help avoid this by having multiple streams of income in different areas. Examples include getting a second job, getting an income rental property etc
Diversify Any Investments
Whilst it is important to diversify your income streams, it is also important to diversify your investments. The stock market and index funds such as the SPX500 can normally be a safe investment, however during previous recessions the stock market can quickly decrease in value. If you have all your investments in one section or area then during any financial crisis this can turn your finances upside down. Go through your investments and aim to spread the risk across different industries and assets.
Difficult times may be ahead for many people, use our guide to create a system that allows you to become recession proof whilst the economy is going down. Learn how to adapt and live a more frugal lifestyle, diversify your income sources and investments whilst paying off big debts are just some of the tips we covered in this guide. By taking these precautionary measures before the recession this should safeguard you from when this occurs. Have the peace of mind knowing that whilst you cannot control the world you can control your finances and be ready for any economy downturn.