It would be a shock if you unexpectedly lost your job or your hours were cut due to a recession or economic downturn. The solution to avoiding a surprise hit to your finances can be found in the old expression “save your money for a rainy day.” This is when you put aside enough money ahead of time so you will be able to weather any storm that life throws at you. But if you are like most of us, this is certainly easier said than done. If you can follow these 10 tips you will be ready to face any bump in the road, whether it’s from a job loss, large medical expense or an expensive car repair.
Save for three months worth of expenses
Put aside at least three months’ worth of savings to cover your bills in a separate account that you can’t access easily. If this is hard to make yourself do, have a small amount deducted automatically from your paycheck each week and deposited in this separate account. Then you won’t even see it, and this will avoid the temptation to go out and spend.
Keep an expense journal of everything you spend money on
Can’t spare an extra dime for your emergency fund? To find some cash that you could put aside for your rainy day fund, keep an expense notebook of everything you spend money on for a week. Then look it over to see if there is anything that could be eliminated or reduced. Do you really need that fancy coffee drink every day or could you make delicious coffee at home? Any cable channels or services you could eliminate? Could you pack a lunch a few times a week rather than getting takeout?
Create a budget to save money
Make a simple budget and stick to it. First list all of your sources of income as well as your monthly expenses. Be sure to include any quarterly or yearly expenses such as car insurance (divide to get a monthly number). Then take a cold, hard look at your results. If your expenses are exceeding your income, decide where you can cut back. But hopefully your income will be greater than your expenses so you will have some extra money to start your rainy day fund to help ensure your financial stability during a recession.
Think of ways to increase your income
If you are like most of us, it is very difficult to cut expenses and change your spending habits. Therefore you might want to think about increasing your income by getting a weekend job, finding a roommate, finding a side hustle, doing yardwork for people, or pet sitting. Every little bit helps!
Sell things you no longer need to save money
Another way to earn some extra money to ensure your financial stability during a recession, is to sell things you no longer need. Do you have an ugly but expensive wedding present or a good set of china you never use? Sell them on eBay. How about gold jewelry that is broken or you never wear? Trade it in at your nearest jeweler and get some immediate cash for your emergency fund. Or perhaps you are great at doing arts and crafts and could sell your designs on Etsy.com. Many people earn a living through buying items cheap at yard sales or library book sales and then selling them online.
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Keep your credit score high~root~>
If you find yourself running sort of cash due to a recession, an economic downturn, or other unexpected expense, you may need to take out a loan. This could be a personal loan, a line of credit or a home equity loan from your bank. The first thing bankers will check is your current credit score. To ensure your financial stability during a recession, always try to keep your credit score high by paying your bills on time and not signing up for too many credit cards that you can’t pay off each month. Avoid paying outrageously high interest rates from “payday loans” and car title loans where you use the equity in your car as collateral.
Call the company if you can’t pay a bill
Never ignore a bill and hope for the best. If you can’t pay a bill on time, call the company and explain your situation, and they might give you extra time to pay without a penalty.
Think about leasing vs. buying a car
When it’s time for a new car, think about leasing vs. buying in order to save money for your emergency fund. There are pros and cons to both and you have to decide which suits your lifestyle (and budget) better. With leasing you will usually have a lower monthly payment, but if you put a lot of miles on your car each year, leasing is probably not for you. If you do decide to buy, consider a used car.
Keep your career skills current
If you do lose your job in a recession, the more skills you possess the better chance you’ll have of getting a new one quickly. This is particularly true for using technology, both hardware and software. So whenever you hear about a professional development class being offered either inside your company or elsewhere, be sure to ask your manager if you can attend.
Keep networking with industry associations or other volunteer opportunities in your field. If an organization is looking for a board member, for example, raise your hand and be willing to do the extra work. Then you will get to know lots of people in your profession that you can contact if you lose your current job due to a recession or downturn.
If you can follow at least a few of these tips you will eventually have that emergency fund to cover your expenses and help ensure your financial stability during a recession. And don’t forget to replenish the fund if you do need to use it!