Financial Security in an Economic Recession
The entire world economy has been brought to a standstill as we all watch to see what happens next. Many people fear there is a worldwide recession on the horizon, but the truth is that no one can predict the future. Rather than trying to pinpoint when and why the next one will occur, this article’s aim is to help you financially prepare for an economic recession. These are a few practical adjustments you can make to help your family weather the hard times.
5 Steps to Prepare for an Economic Recession
1. Purchase Insurance Policies
If you are the primary provider for your family, you carry a heavy responsibility. It is up to you to make sure that your loved ones are taken care of. You need to take steps to prepare for all potential outcomes. This should also include worst-case scenarios. First and foremost, establish life and disability insurance in the event of an accident. Check your policies and choose a plan that will not cut benefits should you lose your job. Remember to shop around and find good coverage in case you are no longer able to work or provide for the ones who matter most.
2. Set Up Emergency Funds
Secondly, it’s wise to establish a savings account with enough to sustain your family through hard times. Most financial advisors suggest stashing away funds to cover 3-6 months of living expenses. Having cash on hand will protect you should you be out of work or face another emergency. The last thing you need is to worry about in these uncertain times is how to pay for daily necessities or put food on the table.
3. Pay Down Your Debts
The next step will be to eliminate as much debt as possible. Try to find ways to trim your monthly expenses and to pay more on high-interest debts. This usually means paying off your credit cards first. If you have a significant balance, try to consolidate your payments. You can also work with your credit card company to find a payment schedule to help you pay down the principal faster. As a bonus, those monthly payments will also help to improve your credit score.
Getting out of debt is the goal, but it is also important to find ways from driving yourself even further into the red. Don’t use those credit cards you are paying off and cut all excess spending from your monthly budget. The satisfaction of being debt-free will far outweigh the discomfort of tightening your belt.
4. Supplement Your Income
If you are concerned about economic times, then you need to find a way to supplement your income. However, don’t overlook your best asset: your current salary. Look for opportunities to pick up extra hours and overtime. In addition to getting paid for extra hours, it is a great way to catch the attention of the people in charge. If your supervisors see your dedication, you can work towards promotion and a bigger paycheck.
There are also many ways to generate cash flow outside of your 9-5 job. You can find tons of opportunities online and in the community. With a little creativity and time, you can find new ways to supplement your income. These side hustles will help insulate you and prepare for an economic recession.
5. Continue to Invest
When the stock market dips, many people panic and want to sell off their shares. Contrary to your instincts, this is the worst thing you could do. When everyone is selling off shares and withdrawing money, it puts a huge strain on the economy. This behavior can turn a slight decline into a massive free-fall.
Give your investments a chance to recover. The best way to strengthen your portfolio is to continue making contributions to your retirement funds. Additionally, the best chance of having your investments outperform is to keep doing it regularly. These steps will help you prepare for an economic recession and keep you primed for success when it recovers.
- How to Plan for a Recession
- How to Consolidate Your Debt
- Reason for Optimism: 5 Signs the Economy Won’t Be So Bad in 2020