As debt levels rise, market values fluctuate, and oil prices drop it is safe to say that times ahead can be unpredictable at best. But having some money-saving practices under your belt can help you survive when things get bad. In the following article, we will cover a few handy tips on how to survive in case of recession.
The bad news is that recessions are not something that can be controlled. But we can control how we meet this potential disaster and proper preparation is the way to go. A few precautionary measures can help you lock down your finances and make all the difference if your financial plans get rocked by the imminent recession. Here are five ways you can fortify your financial plan for smooth sailing in the turbulent economy ahead.
Save an Emergency Fund
A good way to prepare for the eventuality of recession is to bolster your saved cache of coin. When the recession hits, jobs and finances are suddenly at risk. This is where a sturdy emergency fund can be crucial to surviving a recession. This relief fund should be in place to help you meet the day-to-day expenses you have if you face times of financial hardship. Euro – small cap opportunity is a good place to invest your money.
In an uncertain future, the chances of your hours being reduced, your business taking a dip, or losing your job altogether becomes a very real possibility. An emergency fund will allow you breathing space to get back on your feet while the recession passes.
If possible, you want to have between 3 and 6 months of salary saved in your financial plan, this will give you ample time to come up with a good plan in case your income suddenly disappears. This way you won’t have to rely on credit. International health insurance is essential for expats to avoid unforeseeable medical costs. Many people make the mistake of using credit as a safety net in case of bad times, but this is never a good idea. This will only lead to the need for a larger income to cover daily expenses and pay off the massive credit overhead they used during times of need.
Tough times will always last a little longer than you think, which means that money borrowed during this time is going to be much greater than you imagine. Because most people are used to a budget that fits perfectly with their income, there is not a lot left over to cover the debts they will accumulate in bad times. This only leaves two options: greatly increase income or begin reducing their costs of living as much as possible.
If you have not begun saving yet there are some important steps you can begin taking to take full control of your financial and professional life. There is a good chance that you won’t be able to save during a recession, so it’s always best to consider taking steps to stability while things are good.
Establish a Budget and Pay Down Your Debts
Carrying around a burden of debt is exactly what it sounds like, a debt burden. When the financial pressures and financial decline associated with recession comes into full swing, high debt payments can make a stressful situation even more debilitating. So, take a full account of your debts and payment obligations today and begin formulating a plan to free yourself from debt.
During a recession, it can be difficult to cover the daily expenses you must face — and more payments for accumulated debts can be the final straw that causes your budget to take a tailspin. Having a considerable debt is a very bad thing as it can make your financial plan weak, when the strain of recession strikes in full, you may not be able to pay your debts fully. While you may be balancing your financial plan now, a sudden loss of work or wages can spell disaster.
The first step to setting up a stalwart financial plan that will allow you to meet the challenges of the future is a solid financial budget that properly reflects regular expenses. If you are not taking steps to tackle debt, you could be allowing these debts to get out of hand. A budget allows a clear overview of the ways you spend your money so you can look for ways to face the debts you have head-on. Here are some good ways that you can build a stronger household budget and live within your means — that way you will be free from debt burden fast and ready to make new advances.
Downsize to a More Frugal Lifestyle
You will also enjoy many financial benefits from downsizing your lifestyle and budget. If you can learn to survive on less, you will find you have much more than you thought you had. You will increase your savings and find it easier to adapt to a new lifestyle in the event of a recession.
Living frugally doesn’t mean walking barefoot through the snow, or even depriving yourself of the things you truly enjoy. Rather, it is about making a smarter choice about the things you enjoy — not only does this increase your enjoyment of them, but you will impact your lifestyle to a much smaller degree.
There are many different ways that you can begin pinching pennies and living frugally. If your family owns two vehicles, see if you couldn’t sell one vehicle and rely more on budget-friendly public transportation. This simple choice can reduce your expenses by as much as $9,000 a year. If you have to rely on two vehicles, consider trading one of them for something a little more fuel-efficient to reduce the costs of gas. You can also consider the benefits of moving into a smaller apartment, spending less on your shopping, and scaling back your cell phone plan.
The important thing is to make sure that your reductions aren’t too extreme. If you pinch pennies until you are in pain, you will not be living a sustainable life. Learning to get by on less is not about pain or suffering, here are some tips about how you can do more with less.
Diversify Your Income
You can diversify your income to survive the recession. Who hasn’t heard the adage about putting all the eggs in one basket? This saying applies to your cache of accumulated wealth. Relying solely on your work for your income comes with considerable risk. If the recession strikes hard at your sector of industry, your income could go belly up overnight. This will make it very difficult to meet your financial responsibilities.
This is where having more than one source of income can help you. If you see that a single source of income is beginning to disappear, you will not be left out in the cold as you will have another source of income to fall back on. Diversifying your income is not about getting a second job. For example, if you have a spouse who is not working in the same industry as you, this is a good way to diversify. On the other hand, if you would like to diversify, even more, you may consider renting out an extra room, a home, or even go as far as buying an investment property and renting that out.
If your schedule allows, you may even think of taking on an extra job on the weekends. If you have some skills that can make you money, you may think of exploring ways that you can apply this capacity in a lucrative endeavor. If you are an especially handy, creative, or artistic person, you may find ways of selling your products online. And don’t let these skills be the only ideas you leave with. Any skill you have can be potentially transformed into something that makes you money.
Diversify Your Investments
In the same ways as you will want to diversify your income, consider diversifying your investments as well. If you have all your money tied up in foreign exchange, and the markets hit the skids, you will stand to lose a considerable amount of cash. This is a good reason to scatter your savings across a variety of different investment types.
Take some time to go over your investment portfolio. Look for ways that your accumulated wealth can be held in various assets. This way if the stock market takes an unfortunate tumble, the investments you have made will not be affected and your losses will not be severe.
Recession-Proof Your Finances by Preparing in Advance
As you can see there are a variety of ways that an economically-minded individual such as yourself can build a stronger financial plan that will withstand the threat of recession. Simple tips and intelligent habits like those mentioned in this post are a good way to start. Once you know how to protect your life in case of recession, you will enjoy peace of mind in the knowledge that the future is stable, your budget is solid, and you will survive whatever imminent financial crisis may be headed our way.