With more than a decade has elapsed since the 2008 financial crisis, many people today aren't seriously planning for the next financial downturn. While the current economic recovery has been unusually long, it won't go on forever. Here are four steps you can take to make sure you prepare to ride out the next recession with minimal difficulty.
1. Reduce or Eliminate Your Debts
During an economic downturn, one of the hardest things to do is service debts. In the event of a lost job or a cut in hours, many people have a difficult time making mortgage or other loan payments. One of the best things you can do is to reduce or eliminate your existing debts while being careful not to take on any new ones. Position yourself to be debt-free during the next contraction.
2. Bulk Up Your Emergency Fund
Having an emergency fund capable for paying for 6-12 months of expenses is one of the first things you should attend to in order to lead a financially successful life. If you don't already have such a fund or your emergency fund isn't large enough, now is a great time to bulk it up. Ideally, your emergency fund should have enough in it to take care of you and your family for a full year when a recession is likely to occur in the near future. While the full year is almost certainly more than you'll really need, having that much money in your emergency fund will ensure that you're equipped to handle virtually anything that may come up.
To make sure you have cash on hand, it might not be wise pay off all your debt with your funds. You might consider taking out a personal loan. To access multiple lenders at once, you may use Funds2Me.app.
3. Make as Much Money as You Can Now
Another great way to prepare for a recession is to increase your earning power before the downturn starts. Whether this means getting new skill certifications or looking around for a new job in your current career field, increasing your income now can help you earn as much money as possible while times are still good. If your situation allows, you might even consider taking ona part-time job and saving the money you make from it as an extra cushion for less prosperous times in the future.
4. Get Into the Habit of Spending Less
While it's important to bulk up your savings and income, it's also a good idea to start learning to cut back on your expenses. By doing this, you can make whatever you're able to save now go farther if the economy turns sharply south. Simple decisions like buying generic instead of brand-name products or dining out less can make a surprising difference to your monthly expenses. The more ways you can find to save even small amounts of money, the easier it will beto get by if and when reduced spending becomes necessary.By taking these four steps, you can ensure that you're ready the next time the economy starts to slide. Remember that the good times never last forever, so it's important to do everything you can to prepare now so that you don't get caught out lat
This is not legal, financial or professional advice. Please consult a legal, financial or professional advisor for your specific situation.
