How to Prepare for a Recession
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Tips for how to prepare for a possible economic downturn.
There’s been a lot of talk around the office and in the news about the possibility of an economic recession, which could mean cuts in production and employment rates. Many of people have experienced similar times before but for many younger folks, this is their first time facing a downturn as an adult. Regardless of age or experience, here are things you can do to financially prepare for a recession.
Prioritize your spending
There are some things you need pay for no matter what, such as your rent or mortgage, groceries, utilities, debt, etc. Much of the rest is considered discretionary spending. Take a hard look at your expenses and prioritize what is most important. Then examine what could be cut back or eliminated.
Now is the time to look closely at credit cards and loans. If you have credit card balances, consider a balance transfer to a card with a lower interest rate. If your car loan is high, does it make sense to trade it in for lower-cost vehicle?
Also be careful of taking on new debt. Layoffs can accompany a recession. Debt that is easily managed with a steady paycheck can become burdensome when you’re relying on unemployment payments or have no income at all.
Monetize a hobby or take on gig work
Many people bulk up their savings or help cover living expenses by taking on extra work. If you have a hobby such as sewing, you could translate this into a sellable skill as a tailor. Gig work like meal delivery or performing household tasks is another way to generate income.
Consider what happens if you’re laid off
Now’s the time to boost your emergency fund. If you’re just starting an emergency fund, aim to save three to six months’ worth of basic living expenses. If you already have the minimum set aside in a Consumers savings account, consider building up your reserves to cover 12 months.
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