Nowadays, with the rise of inflation and overall financial instability, it might be a good idea to think about how you can prepare for a recession.
Hearing this word always gives most people a shiver down their spine because there is nothing good about a recession. It comes with a lot of negatives, such as job losses, higher prices, and stock market declines.
The smartest move you can make is to prepare yourself for a recession. But how do you do that? Well, this is why we are here! We want to give you the best tips so you can prepare for any economic downturn.
Read on and find out how to build your safety net! Learn how to prepare for a recession and be ready to face it without any fear.
1. First, make sure to cover the basics
Recently, you noticed that it was kind of difficult for you to make ends meet by the end of the month. Your current lifestyle is making it hard for you to pay the bills and buy all the essential things without struggling.
If you feel like you acquire new debt every month, then it is time to make some changes. As you would expect, this is not the best time to begin investing.
First of all, you need to be able to cover all of your basics. Also, besides investing, you don’t need to start paying debt right away. This is not helping you, and in the end, you will have even more debt than you had in the first place.
Before you invest or pay debt, you will have to make sure that you can pay for all the basic expenses like food, rent, insurance, and so on. You need to be able to pay for all of these things before doing anything else with your money.
If you struggle to pay the basic bills, it might be the right time to find a side hustle. This will help you earn more money and, in the end, help you prepare for a recession.
2. Prepare for a recession: Make a plan
Before you prepare for a recession, you first need to know how much money you have, right? This might feel pretty intuitive, but you would be surprised by how many people forget about it.
Before you make a plan based on your finances, it is a must to know exactly how much money you have and how much money you need to spend. To do this, you can start by making a list of all your monthly expenses. After that, you can see if there are any other special expenses and also put them on a list.
Write down anything from your usual groceries to bills, the Netflix subscription, and salon appointments. After you have this list, you can easily plan and prepare for a recession. You will be able to see immediately where most of your money goes and if there are any expenses you can cut out.
3. Take care of the debt
The best way to deal with debt is to have no debt. This is the only way you can make sure that your finances are safe, especially if you are trying to prepare for a recession. You don’t want to worry about paying a debt during hard times, and because of this, you will need to do your best and pay it.
All of this applies only after you manage to cover your basics. A few of the advantages of paying off your debts are that your financial condition will improve, and you’ll save a ton of money on interest payments. Additionally, you will have more money to allocate to other financial objectives and supplement your emergency savings.
Try to prioritize your high-interest debt first. In this way, you can make sure that you pay the appropriate amount of money. If you wait any longer, some things can change, and you might end up paying so much more.
Your interest payments on high-interest loans may be significantly more expensive than the return on your investment.
4. Bulk up your emergency savings
As you prepare for a recession, you need to have everything about your emergency savings in place. You can’t go through hard times like these without having money put aside for emergencies.
Besides all of the evident perks of having an emergency fund, maybe the most important one is that you will have less stress in your life. This will be your main safety net during difficult times, and you should never underestimate its benefits.
If you want an effective strategy to pump up your emergency savings, you can start by saving three to six months worth of your basic expenses. For this, you need to make a different bank account.
Remember that your necessities for survival include your basic living expenses, which include shelter, food, essential utilities, and transportation. Establishing an emergency fund is among the most crucial things you can do to prepare for a recession.
5. Learn how to live within your means
If you want to survive during hard times, it might be possible that you will need to live within your means and sometimes even below your means. It is not that bad, and if you can adapt to this lifestyle, you will surely have more money in the future.
It might sound like a big change at first, and for many of us, it can truly be a big change, but in the end, it is a change that will benefit you, and it is a good way to prepare for a recession.
Try to learn some budgeting strategies and start to apply them. Doing this will help you track your expenses more easily. In the end, what you want to do is make some space between your income and your expenses. You want to widen that gap, and to do this, you will need to cut out those luxuries.
If you live in a dual-income household, you can try to live on just one income, and the other one will be put in the savings account. Getting frugal might help you prepare for a recession, and you should not underestimate it.
6. Try to create multiple streams of income
Having several income sources is ideal, and it can help you prepare for a recession. And there is good reasoning behind all of this. By having more than one income source, you will increase your finances, and you can also benefit from the peace of mind that comes with all of this.
In times like these, when economic uncertainty rules above all, you can try to increase your earnings by finding a way to make a profit. The easiest way to achieve this is through a side hustle.
Maybe you have something you are passionate about that can also make you money. Think about it. Maybe you love to repair cars, and you also love to write. Both of these things might be profitable if you have the time to invest in them. These are just two examples; there are many more possibilities out there that can become your side hustle.
If you want to start budgeting, an agenda might be a good idea. This one might be a good choice: Wykeham’s Resourceful Journal
You should also read: Don’t Let Inflation Drain Your Wallet – Follow These 9 Tips!