Negative news is everywhere, from the Coronavirus to the doom and gloom of a recession to the downturn of the stock market.
Global recessions are a temporary period of reduced economic activity or cyclical slowdown, which happen about every eight to ten years. This slow down usually leads to cuts in pay and layoffs in many industries.
As the world faces the risk of a new recession, it is essential to manage your money well, so you’re not so anxious and worried. Also, while you're working, it's important to free up cash right now because if you're in jeopardy of losing your job, your ability to get approved for credit could be affected.
You should be proactive and focus on the following now, so you have a plan in place for the foreseeable future:
Learn to budget and live with-in-your means.
Start by writing down or using a budgeting app or software to record your income and expenses for the month and do not allow yourself to spend any money that is not in the budget.
A budget will help you gain control of your finances. By documenting purchases, you identify gaps in your spending and become more aware of the areas where you could cut back, such as the money you spend daily on a cup of coffee or buying lunch. If necessary, use your talents and experience to increase your income by starting a side gig.
Stop using credit cards.
Paying with cash or using a debit card is essential to staying out of debt, especially during a recession. If you must use credit cards, then pay the balance off in full every month or within the billing grace period.
Start or add to your emergency savings fund.
It’s imperative to have some money set aside to cover the unexpected. When it comes to building your emergency savings, one size doesn’t fit all. For example, if you are the sole income earner, its best to save up to three months of living expenses as a base amount, then grow your savings to at least nine to twelve months over time. This amount sounds like a lot (and it will take time to save); however, if you experience a layoff, you could find yourself having to cover your necessary living expenses, in addition to paying your entire monthly healthcare premium through COBRA or the Healthcare Exchange through your state.
Setting up an automatic transfer of $50, $100, $500, or more from your checking account into savings each pay period, saving your tax refund, negotiating your bills by calling service providers to ask for a better rate, refinancing your auto loan with a lower interest rate, and canceling unused subscriptions and transferring the amount you would generally pay toward the bill into your savings are just a few ways to build an emergency savings fund.
Use a reputable Financial Advisor or a Fiduciary who has your best interest at heart.
They can advise you on lowering the cost in fees you pay in your 401(k) and other investments, as well as show you how to remain or become more diversified based on your age and risk tolerance in this volatile market.
In some circumstances, it may be wise to reduce the percentage of your contribution or stop contributing to your 401(k) altogether, so you can put away money in a traditional savings account, which will give you access to immediate cash.
Focus on maintaining good health.
By eating healthy and exercising regularly, you can save money in the future due to lower healthcare and prescription cost.
If you take prescription drugs, ask your doctor to write you a 90-day prescription instead of a 30-day one, which can often be cheaper in the long run.
Also, Planning and preparing your meals in advance allows you to keep the money you would have spent on eating out.
Seek God.
I have grown in the understanding of what it means to seek God first, and He will see that your needs are met even in hard times. In other words, when you put God first, His Word promises that everything that is a challenge seems to fall into place. God’s word gives us direction, strength, and peace, which guards our minds. So be prayerful, be hopeful, and know at some point, everything is going to be alright.
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Livia Kelly is the Author of Unmarried and Debt-Free. Livia's book has made Amazon's #1 Best Seller list in Personal Budgeting and Two-Hour Self-Help Short Reads. Her goal is to simplify finance by providing sound and useful guidance about budgeting, saving, tackling debt, and achieving financial success on your own. More information can be found at https://www.liviakellyauthor.com.