Hope for the Best. Prepare for the Worst.
We’ve been hearing talk about a potential recession for months, but is it really looming up ahead in the distance? While no one can see the future, we can all take steps to prepare if the worst should happen. In this post, we will take a look at how to recession-proof your finances so you can be equipped to handle whatever comes our way throughout 2023 and beyond.
So, what is a recession?
A recession occurs when there is a “significant, widespread, and prolonged downturn in economic activity.”1 This downturn impacts jobs, interest rates, and spending. During a recession, it is common to see layoffs or hiring freezes, higher loan rates, and consumer demand wane.
Break out the budget
It seems that a recession is out of our control, but that doesn’t mean you have to be a sitting duck. There are actions you can take to help minimize the impact ahead of a recession. Starting with your budget. Since you can’t fix what you don’t know is broken, now is the time to take a deep dive into your household budget. Are there expenses that need to be tamed? Are you paying for subscriptions or services that you no longer use? Are there money-saving opportunities available for you? If you need a template, we have a household budgeting worksheet that covers just about any spending category you could imagine. Click here to check it out.
You may be able to negotiate lower premiums on your insurance, a lower cell phone or cable bill, or even a more favorable credit card rate just by asking. Shop around because your wallet depends on it. While you are updating your budget, take this time to keep your resume current. If the worst should happen, and you lose your employment, you want to be ready to apply for new ones as soon as possible.
What if…?
We love a good surprise. Your co-worker treating the office to cake is fantastic - - but what about the bad surprises? You know the ones I am referring to. You come home to a burst pipe spraying water all over your basement, or your AC conks out in the middle of the summer heat. Paying lots of money out of pocket is a painful reminder that not all surprises are good. A recession poses the very same risk as any other bad surprise.
The best way to beat one of those bad financial surprises is to prepare for it. That means if you haven’t already, start setting aside cash for an emergency fund right now. A good starting point is stashing at least $1,000. If you can do more, great, but $1,000 will give you a little bit of a cushion when you need it the most.
How can I save what I don’t have?
We are all working hard these days, but if you have the spare time (and energy), a side job might be a great way to watch your extra money pile up. There are all sorts of part-time jobs and side hustles out there, you just need to look for one that fits your needs. Don’t want to leave the house? Consider looking into filling out surveys for a couple of bucks. You won’t get rich, but over time, it adds up.
1 https://www.investopedia.com/terms/r/recession.asp
Do you have suggestions about how you can prepare for a recession? I want to hear from you. Leave a comment below or email me.
Krista Kyte is a personal finance blogger and personal banker with over 20 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that help consumers reach and maintain financial security and start living the life they’ve always wanted.
