If you’re worried about a coming recession (and it will come at some point, I just have no idea when), there are things you can do to protect your finances. And even without a recession looming, they’re still smart things to do to improve your finances and keep you on the road to building wealth.
Taking these steps now – before a recession hits – will help you and your finances better withstand the downturn when it comes. Plus, these steps will also make your overall financial situation more secure, giving you peace of mind and a more stable financial future.
I. Pay down as much debt as possible, especially high-interest debt (like credit cards and personal loans).
Quick Tips for Reducing Credit Card Debt:
- Make multiple payments throughout the month rather than one payment on the due date
- Pay any amount (even $5) more than the minimum payment every month to cut years and thousands of dollars in interest off your debt
- Focus on one debt at a time, putting all extra money toward paying that one down, then move on to the next one.
- But make sure to make the minimum payment on all cards on time every month
Click here for more a more detailed plan to pay off your debt.
II. Find additional income streams to boost the amount of money you’re bringing in every month.
5 Ways to Add Income Streams
- Start a side gig, whether it’s using your existing skills and contacts or joining the gig economy by, for examoke, driving for Lyft or delivering food for DoorDash.
- Invest in securities (such as solid stocks, REITs (real estate investment trusts), mutual funds, or exchange-traded funds) that pay regular dividends (payouts to shareholders) Reinvest the earnings for now to increase your holdings, and that will build up your investment to provide more cash later whenever you need it.
- Rent out space you’re not using – a shed, half a garage, an attic or basement storeroom, a driveway
- Join online focus groups and earn $30-$300 in 2 hours or less. You can find info on legit gigs at TheBalanceCareers.com
- Sell things you don’t use or need anymore through apps like DCluttr (for books, CDs, and DVDs) and Poshmark (for clothes)
III. Build up your emergency savings, even if you feel like it’s fully-funded. Jobs loss is very common during recessions, and it can be much harder to find new jobs when the economy is down.
Boost your savings by:
- Setting up regular, automatic transfers to your savings account
- Funnel money from your extra income streams into savings
- Move your savings to a high-yield online FDIC-insured savings account to earn more interest
IV. Other Things to Do and Not Do
As you’re getting ready to recession-proof your life, make sure to include these steps in your action plan.
- Don’t borrow money against your house (home equity loans, for example)
- Do go to the doctor/dentist for anything you’ve been putting off
- Do update your resume
- Do improve your job skills or learn new ones
- Don’t focus on the ups and downs of your investments… UNLESS
- Do move some of your retirement savings to cash equivalents if you plan to retire within the next three years
- Do create an emergency budget before you need it
- Don’t make emotional decisions about your investments, especially long-term investments (like in your retirement accounts)
- Do have a financial advisor review your portfolio and talk to them about shoring up your financial position
- Do scoop up good investments at bargain prices
Preparing for recession is the surest way to sail through it with minimal financial damage. Click here to contact me today and together we’ll create a plan to recession-proof your finances.