With news stations constantly broadcasting pieces on the impact that the pandemic is having on the economy, talk of a looming recession is increasing. It’s only natural to be concerned about this, but it’s important to remember you’re not helpless. With a bit of planning and sensible spending habits, you should be able to ride it out. Here are seven tips.
Form a Plan of Action
The first thing to ask yourself is how would a potential recession impact you? Could it result in unemployment for yourself or your family members? Are you likely to fall behind on your mortgage payments, or will it affect your plans for down payment savings? Will it affect your retirement or college funds? How will your short and long term plans change? If you’ve already lived through the 2008 recession and managed to bounce back, you may already have a plan of action. Yet it’s good to bear in mind that the economic climate has changed in the past decade, and it’s difficult to predict what the future holds. Now is the time to sit down and consider all your options and assets, and draw out a plan A, B and C.
Increase Your Savings
Make sure that you have enough money set aside for rent/mortgage, utilities and other essential living costs for several months. Saving enough money to see you through potentially losing your job, for example, may take months and even a year, so the sooner you start, the better. In order to determine how much you can save, you will first need to figure out how much you’re spending each month, and what you’re left with.
Cut Down on Unnecessary Spending
In these uncertain times, deciding what you spend your money on can help reinstate a sense of control. Yet there are pitfalls to making unnecessary expenses. Take a moment to make a list of any items or projects you were planning to spend money on this year, and ask yourself which ones are worth it.
For example, your home may not need a decor change, unless you have to make structural improvements. A holiday can be very tempting after months of lockdown, but perhaps you can keep it local rather than going abroad. Also, look through your bank statements for any expenses that aren’t necessary, such as gym memberships or takeaway meals, and cull your spending habits as needed. Ideally, less than a third of your net income should be spent on discretionary items.
Reduce Your Debt
Debt can be a real drawback at the best of times, let alone in a potential recession. And while it may seem counterintuitive to spend more in order to settle your debts, this will save you a lot of worries in the future. Even though you probably won’t be able to pay off your mortgage loan straight away, there are many debts you can prioritize, especially if they are high-interest ones. If you have payday loans, or credit card debt, make a point to settle them sooner rather than later.
Don’t Play the Stock Market
You probably heard of the phrase ‘buy low, sell high’ and maybe you’ve been tempted to play the stock market. And with oil prices being so low, you might be contemplating buying oil company stocks — but who’s to say electric cars won’t suddenly surge in popularity? The stock market can be very volatile, and it’s difficult to predict its highs and lows. It is an experienced investors’ playground, and it’s not beginner-friendly. In fact, you could risk losing money that would be better placed in your savings account, so it’s best to resist the temptation.
Improve Your Employability
Nobody likes to think about potentially losing their job during a recession, and here’s hoping this won’t be something you’ll have to worry about. Yet it’s always best to be prepared for potential cutbacks in your workplace. Therefore, strive to become an asset in the company you work for. Also, you can work on acquiring new skills that can increase your professional value. There are many online classes you can take, on subjects and skills that perhaps were not around when you were in school or in college. Always have a backup plan ready.
Look After Yourself
Last but not least, remember to take care of yourself. No matter how uncertain the times, focus on what you have control over, and remember that you’re not alone. Talk to your family about your worries, and make sure that you and your partner are on the same page when it comes to future plans. Be supportive, and don’t forget to ask for support. Your loved ones will always have your back, and you can get through this together.
This article is intended for informational purposes only and should not be deemed as legal, financial or investment advice or solicitation of any kind. Before purchasing real estate or insurance, always consult with a licensed attorney, financial advisor, insurance agent, and real estate broker.