If the coronavirus has taught everyone something, it’s the importance and value of money. So, if you’re not preparing and making moves right now, you should be! These are the essential financial steps to take during a recession!
Start A Personal Budget
As is so often the case, it all begins with forming a budget. There are plenty of articles here on FinanceChatter that go into the budget process in-depth, but in the most straightforward instructions: note down everything you spend and break it down into categories, like Food, Bills, Gas, Outings, etc. Then, balance that against the money you make each month. If its more than you make each month, its time for a change. Even if it’s not, see if you can clean up the budget by eliminating subscriptions that no one uses and the like.
Once you start saving money, start a new fund: an emergency fund. Make sure you have enough to cover six months of expenses, in the event that you should lose your job. Unfortunately, during a recession or hard economic times, that can be more likely. Once you have your emergency fund, its time to pay off your debts!
Pay Off Your Debts
Paying off debts should be at the top of everyone’s financial to-do list. Sadly, its never a pleasant process. Thankfully, it can be a tad bit easier during a recession, should you be lucky enough to keep your job. During these times, more and more companies are opening up to negotiating with debtors or renegotiating rates. If you have multiple types of debt to pay off, focus on credit card debt first, as it tends to have the highest interest rates.
Can’t pay back the debt at all? Don’t be scared to reach out to the bank or the card issuer. They can show their customers a way to reduce the payment due to the bad financial situation in the country. Some companies have assistance programs for agreements that’ll save their customer’s credit score.
Set-Up A Retirement Plan
So, you’ve set up an emergency fund and taken care of your debts – what’s next? Well, another smart financial move to make during a recession is to begin investing in your retirement. After all, how many people have recently learned that, sometimes, retirement can come quite a bit sooner than expected. No one likes to be caught off guard – so start saving for retirement as soon as you can. Meanwhile, begin to talk with your family about your retirement plans, even if you’re young. Think about where you’ll be at 60 or 65, and consider if you can work for a larger Social Security check.
Without a doubt, the COVID situation changes every day. In fact, many economists predict that the economy will bounce back once there is a vaccine. However, there’s no way to know for sure. And few people regret taking care of their financial issues earlier than expected. So, take this time and make some smart financial moves!
Sources: The Motley Fool, MSN