Markets are in turmoil, and while a possible recession, generally defined as a slowdown in growth or drop in output, has been talked about in recent years, in early 2020, a spreading contagion wasn’t on the radar among many, if any. In October 2019 a Bankrate survey found 2 in 5 Americans were not prepared for a recession, and that’s unlikely to have changed much less than six months later.
Get Help from an Economic Damages Expert If You Need It
It’s essential to begin planning for the unexpected and a possible recession as soon as possible to protect yourself. If you suffer from financial damage due to a layoff, injury, promotional denial, or another similar setback in your workplace, it’s a must to contact an economic damages expert.
Pay down debt
Another part of planning ahead is to pay down your outstanding debt, especially credit card balances that come at a high cost due to interest to provide breathing room in your budget. As an economic recession often leads to job losses, paying off as many of your obligations as possible will bring peace of mind while making the situation easier to get through.
To do so, start with your credit card debt and then work on paying down other loans like your car loan or mortgage. If you have a student loan, less urgency should be placed on that as they tend to have more favorable provisions. No matter where we are in a market cycle, prioritizing high-interest rate debt is always a good idea – that will allow you to put more into savings so that you have cash available in an emergency.
Increase Emergency Savings
Speaking of emergency savings, try to boost it as much as you can. Having cash available for an economic downturn can help ensure that you can at least afford the basics. Even while paying down debt, prioritize putting something into savings, with a goal to have at least a month’s worth of living expenses, although the more the better for obvious reasons. Ideally, you should be able to get by with at least three to six months to help you get by. Look for the highest yield savings account that will help you earn more on the money you’re able to put away for a rainy day.
Look For Ways to Spend Less – Don’t Spend Beyond Your Means
Spending less is one of the best ways to save. As soon as possible, well before a downturn begins, go through all of your monthly expenses to determine which items are discretionary. That means everything from your daily morning Starbucks to magazine subscriptions, cable and gym memberships. All of those things can add up to a significant amount of money over time.
Aim to create a budget that includes spending no more than 30 percent of your income after taxes on discretionary items. Don ‘t live beyond your means – while your mortgage or rent payment, car insurance, groceries, and utility bills are essential, vacations and anything you don’t really need is discretionary.
Build Skills and Continue Education
One of the best ways to make your life more recession-proof your life is to build more skills by pursuing an education. The more skills and education you have the less likely you’re likely to remain unemployed if you lose your job. Even if you can’t save much money, ensuring that you have skills that will make you more employable can be critical.