I was born in 1985 and as a millennial my first steps into the working world coincided with the 2008 recession. I graduated from college in May 2007 and entered the workforce six months before the US economy went into freefall for 18 months. At the time, I had never heard the word recession before, but very quickly realized what it was and how real the impact could be.
I was a fresh grad with a new job, but instead of getting an apartment right out of college, I made the safer decision to move back in with my parents for two years. My family and I weathered the recession relatively unscathed, although watching our retirement accounts take a massive dive was no fun. But the impact of the recession was everywhere.
I have seen friends lose their jobs and struggle to find well-paying work. Gas prices soared to over $4 a gallon. Foreclosures exploded and many people lost their homes. Birth rates have declined. It was a crazy time, and many people, especially millennials, are still feeling the effects of the 2008 recession today. It was a tough time, to say the least.
As a growing chorus of financial analysts and economists pontificate about the likelihood of another recession, it’s important to know that you can take steps now to shore up your finances and weather any storms that may be heading our way. we.
Here are seven steps you can take to manage the impact on your finances during a recession.
1. Cut unnecessary expenses
It’s always a good time to comb through your bank and credit card statements and see what’s going on with your money. Maybe you have a few subscriptions that you wanted to cancel but never managed to do. Or maybe you made extra trips to your local takeout restaurant instead of planning your meals on the weekends. Here’s your chance to cut the fat from your expenses.
Are you a long-time customer of a particular service provider? This is a good time to shop around and see if you’re still getting the best price for that service, or call to see if there’s room to negotiate the current price down.
A prepaid cell phone service provider can cut thousands of dollars off your annual cell phone bill, and cutting the cable in favor of lower-cost streaming services are options worth exploring. Both strategies have worked well for me in the past.
2. Boost your savings
Although layoffs are possible in any economic climate, the chances of you experiencing one increase during a recession. When people slow down their spending, that reduction in revenue affects businesses, and one of those businesses could very well be your employer. So if you typically keep an emergency fund for three months, I recommend doing what you can to increase it, or even double it to six months or more.
You can do this in a number of ways, including diverting the money you save by cutting back on those non-essential expenses and looking for other ways to earn income by hustling, dabbling in the gig economy, or advocating. for a 9 to 5 raise.
Best-case scenario, you don’t lose your job and you’ve just created an extra cushion that can give you peace of mind or can be used for a larger goal, like buying a house, when the economy is still on the rise.
3. Prioritize repayment of high-interest debt
Interest rates fell to zero during the Great Recession to stimulate spending. The opposite is happening, where interest rates have jumped in just a few months. When interest rates rise, borrowing money becomes more expensive. The biggest impact for most will be the price of variable interest rate debt, also known as credit card debt.
It’s important to know that more of your debt payment will go to interest as rates rise, so if you’re able to increase your repayment plan, now would be a good time to offset the potentially higher costs for you down the line.
4. Diversify your skills and polish your CV
If it’s been a while since you applied for a new job and your resume hasn’t been updated in the past 12 months, now is a good time to update your resume. Be sure to include your latest role and experience, grow your network through LinkedIn or other relevant alumni or industry groups.
Also, don’t be afraid to reach out to former colleagues who might have openings at their current workplace, or who might just serve as a sounding board and source of community.
I would also recommend keeping an eye out for layoffs in your field on message boards like TheLayoff.com and Layoffs.FYI. Layoffs can be incredibly unsettling, even when you see them coming, but having some time frame can help shore up your resources.
5. Boost your income with low-start side hustles
I like a good side hustle. Personally, I am against relying on just one source of income to find your life. We are too close to zero, and especially in a recession, income instability is a real possibility. If you’ve always had a business idea, now is the time to give it a try.
Thanks to the Internet, starting a low-cost online business is more accessible than ever. Start by looking at your existing professional and personal skills and see if there’s anything on any of these lists that you’d like to do as a side hustle.
6. If you can afford it, keep investing regularly
Stock market volatility can be scary, but it’s important not to panic and think about ways you can use this moment to strengthen your long-term goals by investing. If you invest regularly for your retirement, I would stay the course, even if you find that you have to contribute a little less each month.
In general, if you’re worried about buying at the wrong time, overall I wouldn’t recommend trying to time the market. Instead, consider setting a monthly investment goal, regardless of what’s happening in the market. Using this approach can help you form the habit of investing regularly, which is a key strategy for building long-term wealth.
7. Delay big purchases you don’t need right away
There’s nothing worse than making a big purchase, like buying a house, for example, and losing your job right after. It happened to my husband just before we started home shopping in 2015. As a result, we put off buying a house until a year later when he finally found a new use. Not having to worry about a mortgage was a godsend, so if your job or industry is experiencing an increase in layoffs, it might be time to revisit your big spending plans.
However, with rising interest rates, if buying a home is your #1 priority, it may not pay to wait. That’s why the old adage “personal finance is personal” is more true than ever.
Recession talk can strike fear into the hearts of many, especially when it comes to your personal finances. Even though they are an integral part of the business cycle, that doesn’t mean you have no control over how to manage the impacts a recession can have on your money. Use these seven steps to prepare for a recession and put yourself in a safer position through strategic planning.
Jannese Torres-Rodriguez is a nationally renowned money expert, educator, speaker, writer and business coach. She became an accidental entrepreneur after a job loss led her to start a successful Latin food blog, Delish D’Lites. Now, she helps her clients and listeners build successful online businesses that allow them to pursue financial independence and freedom. Jannese is on a mission to educate marginalized communities on topics such as entrepreneurship, investing, and building generational wealth through its personal finance podcast,”I want money.”
This content is for informational purposes only and is not intended to be used as investment advice. The strategies and investments discussed may not be suitable for all investors. Consider your financial situation carefully, including investment objective, time horizon, risk tolerance and fees before making any investment decisions.
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