Here we go again! Another wonderful part of the economic cycle that makes you clutch your pearls and run for the hills! The word “recession” gritting through your teeth with fear of what’s to come. We’ve been here before. We’ve survived this before. Bankrate.com reports that “48% of American women feel unprepared ahead of a recession and 38% men feel unprepared. Of those polled, 31% of Americans who feel unprepared are currently doing nothing to improve their financial situation.” If you are in one of these categories and you find yourself not taking action to protect your financial security during the recession, here are a few ways to get started today!
Have a Plan
It is nearly impossible to be financially successful without knowing what your goals are. Having a plan and establishing short and long term goals is the key to protecting your finances during financial transitions and uncertain economic times. A plan includes knowing where your money is coming from, knowing where it is going, and giving it a job to do. Money is a resource. You bring in income to provide a certain lifestyle, pay your bills and expenses, and enhance your quality of life. A recession does not change that. It does however require you to be diligent and focused on how your spending aligns with your goals in the short and long term. A recession is one part of an entire economic cycle. It may come, but it has to go too. As you prepare to protect your finances during the next recession, keep your goals in mind and keep your spending in alignment with those goals. Good financial habits will carry you through if you are willing to get prepared now!
Track Monthly Spending
Tracking your spending is a vital part of building financial stability. You have to know where your money is going to accurately create a plan for how you’ll make it work for you. During the last 3 months, you have likely seen an increase in your monthly essential expenses due to inflation. No need to fret. It is important that you see this now so you can be proactive in how you move forward with your finances. Almost 50% of American adults are spending less on discretionary purchases. Discretionary purchases are items that are brought after all bills and expenses have been taken care of. It is the “play” or “fun” money that is used to buy non-essentials. Are you one in the number? If so, how are you reallocating your funds that are being preserved from a decrease in discretionary spending? One major opportunity is reallocating your money towards savings, which about ⅓ of Americans are choosing to do.
Build Emergency Fund to Cover at least 6 Months of Expenses
Having an emergency savings enhances your financial security in so many ways. An emergency fund helps you cover unexpected interruptions in income and unexpected expenses.
Here is a step by step guide to building an emergency fund: 1) Determine monthly expenses 2) Add all expenses up 3) Multiply by 6 and that is how you get the total amount needed.
Recessions are scary but they provide an opportunity to reset, reassess and move forward with more confidence in your financial future. What have you been doing to protect your finances in the event of a recession?