How to Recession Proof Your Finances in 8 Easy Steps

How to Recession Proof Your Finances in 8 Easy Steps

Every day I turn on the news and watch the markets. The zigzag pattern as they plunge and then come back up again and gain ground is alarming to watch. Some of us watch, entranced and yet too afraid to look away, while others choose to turn off the media and pray fervently instead.

No matter where you are on the spectrum of emotion, here is something you really do need to consider.

Frugal people actually have specific habits which allow them to weather an economic downturn.

There are eight specific steps you can take to insure that you survive any predicted economic storm in the best shape possible.

You can adopt a lifestyle that lends itself to maintaining a sense of peace and stability in the midst of market fluctuations.

Perhaps you are a fly-by-the-seat-of-your-pants person and figure it will all work out if you just hang on tight. On the opposite end of the spectrum, if you are terrified because you have no savings at all, then you need to hang in there, too. No matter what your mindset, I’m going to give you step-by-step instructions for flipping your finances right side up and keeping your boat afloat during economic storms.

Factors that affect finances:

A multitude of factors are currently influencing the financial markets, prices, availability of basic products, and the overall confidence of the population.

  1. The corona virus
  2. Trade sanctions
  3. High consumer debt
  4. High US debt
  5. Slow GDP (Gross Domestic Product) growth

Turn on the television and you’ll hear increasingly louder rumblings of another economic downturn, coming soon.

You don’t have to get in your financial boat and let the rushing waters of a rough economy propel you downstream to an unknown fate. You can gain control and pilot your craft through the choppy waters and get safely to the other side.

Under the Median

Let’s see how you can weather times of financial uncertainty in eight easy steps.

1.Create a Budget

Living without a budget is like fighting a forest fire with no plan of action. Every every once in a while you manage to spritz a little water on your towering debt inferno. Yet, you are inadvertently fueling the fire (because you have no idea who or what you owe).

So, do yourself a favor.

  • Track expenses for 30 days.
  • Use that information to help you create a categorized list of expenses.
  • Add expenses which occur periodically – like insurance and property taxes.
  • Subtract expenses from income.
  • Voila! You have created a budget.

2. Cut Costs

Go through each budget category and slice it with a virtual knife. This is particularly important if you find that you are spending more money than you are making.

We have done this time and time again throughout the past three decades of budgeting.

Here are some practical tips for cutting costs.

  1. Nickels and dimes add up to dollars. We tend to discount small amounts of cash as inconsequential. However, we must remember that when you total up all that change, it can add up to some serious cash to save toward future goals or pay down debt.
  2. Spend less time shopping. Don’t peruse on-line websites just to see “what’s new”. Get a new hobby. That’s a sure fire way to spend more money than you ever dreamed.
  3. Ask yourself if you really need it before you hit that “order” button. This has been crucial in my family’s quest to live on a small income, yet achieve some pretty amazing goals.

3. Pay Off Debt

Be sure you OWN and don’t OWE. I can’t state firmly enough that debt is your adversary. You must constantly be on guard, embracing delayed gratification and tracking expenses on a daily basis.

Need help and inspiration? Request a free copy of my 17-page eBook, filled with advice, tips, and strategies for paying off debt and setting savings goals.

4. Stop Spending Money on Stuff You Don’t Need

The book of Proverbs says, “Little foxes” spoil the vines. When you are fighting to meet your goals, it’s not generally that you are out dropping $500 on dinners at fine restaurants. It’s that you have several budget categories that are too bloated.

Here’s an example we can all identify with. You decide to have a scoop of ice cream every evening. You can go a few days (or maybe even a month) without seeing a huge difference in the way your clothes fit, but, after a while, your pants won’t button. It feels like it happened suddenly, but, it was a process. The overindulgence of a few hundred calories each day has added up and now you need to make a change.

Overspending is a lot like overeating.

Learn to think before you buy. Ask yourself questions. Is this item a want or a need? Can you afford it? What effect will it have on your written goals?

Decide here and now that you won’t “nickel and dime” yourself any more.

5. Create an Emergency Fund

When faced with a $400 unplanned expense, nearly seven in ten people could not pay for it without seeking a loan from a friend, a financial institution, or a pay day loan company. Fully One-fourth of Americans have absolutely no savings, while only 15% have a healthy emergency fund.

A basic emergency fund of $2000 should be the first stop on your journey to debt-free, financial independence. After paying off your consumer debt and student loans, this should be increased to a full emergency fund, representing six months of basic expenses.

6. Make Yourself More Employable

Job security is never 100% certain, no matter how indispensable we would like to believe that we are. In fact, during a recession, everyone across the board has fifty percent greater chance of being laid off. That doesn’t mean we will see unemployment reach those heights. It merely means that many jobs become less stable and some will come to an end.

Now is the time to hedge your bets and craft a plan for insuring that (should you get laid off) you have a better chance of becoming employed again soon.

Take classes, get certifications, upgrade your skills, learn more about your passions, and be sure you are working well for your current company. Additionally, you might look into perks from your current company. Will they reimburse you for classes taken from a local college or pay for certifications?

7. Stock Up on Staple Items 

Although this has become increasingly difficult as store shelves are cleaned off of toilet paper, cleaning products faster than they can be stocked. Not only is having dry and canned foods on hand, it is also important to adopt other strategies for saving money on your food budget.

  • Know what food you have on hand.
  • Keep your pantry, fridge, and freezer organized.
  • Start a garden.
  • Learn to cook.
  • Menu plan.
  • Stop wasting food.
  • Stay out of restaurants.
  • Get the whole family involved in the goal to save money on food.

8. Educate Yourself

If you are having trouble managing your finances, now is seriously a great time to read books, watch videos, listen to Podcasts – all dealing with the topic of money. You will never have a better opportunity to learn to budget, pay off debt, and set goals.

If you need help getting started, click on the banner below. I’ll send you a copy of my free 17-page eBook to help you track savings and debt payoff goals.

Leave a Comment