Financially Preparing for a Recession

Financially Preparing for a Recession

August 10, 2020

Back in 2007-09, the mortgage bubble burst, sending the United States into one of the worst recessions since the Great Depression. Families across the nation were severely impacted, causing an unprecedented amount of financial pain.

Now with the coronavirus continuing to storm the earth, it is time to take a second look at your finances and make sure you can not only survive, but thrive during an economic downturn. With the below tips, we hope you will be able to stay calm, cool, and collected for when (not if) the recession rolls around.

The tips:

1. Kill off consumer debt
2. Have a plan
3. Start Hustling
4. Save Dat $$$

Each tip will have a link to a more in-depth blog post to read or video for you to watch to continue learning. Enjoy!

Kill off any consumer debt

If you have debt, the alarm bells should be blaring in your brain every single day. This should be an absolute priority for you to get rid of. If you don’t know where to start, check out our blog post on Dave Ramsey here. He is the debt elimination king.

But briefly, he recommends tackling the lowest debt amount first, paying minimum payments on the rest. As you pay off your first liability, take that amount and roll it up into the next payment. He calls this the “debt snowball” and although it is slightly less effective mathematically than taking out the highest interest rate first, Dave has found that this way is much easier to follow through with. And that’s all that really matters in the end.

Read More: The Slow Squeeze of Debt

Re-evaluate your financial plan

When was the last time that you gave your monthly expenses a once-over? It may feel like you don’t have much breathing room, but do you really need those subscription boxes anymore? Is there room to cut back on entertainment by doing more cheap/free activities? (Hiking is one of our personal faves!) Get out a pen and paper, print out your bank statements and try to create a plan you can stick to going forward with as much savings as you can afford.

Budgets Dont Usually Work - Here is How to Fix That

These plans aren’t meant to be rigid, as we wrote about in this blog post, but having a plan is more critical than most people think. You need to tell your money where to go, rather than having it tell you!

Leverage Your Skills With a Side Hustle

Is there something all your friends come to you for? Any predisposition or talent?

Mine was always personal finance and investing! Which is why I started this blog in the first place. Start small, and don’t give up when things may get tedious – this becomes a great way to earn extra income while doing something you actually enjoy.

I make my life easier by writing to-do lists, waking up early to get a jump on the day, and staying as organized as possible. If you use these 3 skills in your side hustle, there is nothing but time that stands in your way!

Boost your emergency fund

Sometimes, things are going to go wrong. Being prepared is the only real way to deal with the things that life will throw at you. Start saving cash in an emergency fund.

Even if it’s just $10 each pay period – starting somewhere is the most important thing.

The first thing personal finance guru Dave Ramsey recommends to his students is to save a $1,000 emergency fund. This cash isn’t for pizza, or drinks at the bar, its for emergencies and emergencies ONLY!

After that, building your stash up to 6+ months of expenses is the target. Remember, the goal is to be prepared. So if you feel more comfortable with 12-18 months of expenses, that’s fine too. Just remember that every dollar you save in cash, is one less dollar that can be working for you in investments. So striking a nice balance is key.

By enacting these tips - you will be putting yourself on much more solid financial footing going into an economic downturn. Please stay safe and feel free to reach out to us if you have any investing or trading related questions.

MDAS

If you thought this was helpful, terrible, or somewhere in the middle, please leave me feedback in the form of a Direct Message on instagram @MakeDollarsAndSense, or feel free to send me an e-mail/text to the information on my Home Page. I truly appreciate constructive criticism and opposing views, so bring em on!

P.S. New blog posts coming your way every Monday!

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