How To Protect Your Finances During A Recession
What do you think about the upcoming recession and the “bear market” that’s been stirring in the media?
I was asked for my opinion on the current events of rising prices, job security and the frightening roller-coaster ride of the stock market. I suppose the real question boiled down to how much panic am I investing into the issue?
My simple answer: I am riding it out.
The real truth is, there is little we can do to stop the rising prices of goods and services or how our government is reacting to the housing market crisis.
However, we CAN control the way we handle our finances.
How can we ride out the turbulent inflation crisis? Here are five ways how:
1. Reassess your budget each month
Do you know where your money is going each month? With the steep prices of groceries and gas, it’s a good time to reassess your needs and your wants. Perhaps there’s an unnecessary expense, like a gym membership or beauty box subscription, that you haven’t used in over six months and can put on hold for the time being. Moreover, take inventory of your kitchen supplies – oftentimes, we have deeply hidden pantry or freezer items that we’ve forgotten about, but granted that it’s unexpired and still in good condition, why not use them up instead of going grocery shopping for the week? This one tip could save hundreds of dollars in your budget each month!
2. Stop looking at your retirement accounts
With the news constantly alarming us that we’re experiencing a recession, we’re more likely to experience panic and hyperfixate on our monetary accounts. This is not new to us. We’ve seen this happen back in 2008 and most recently in 2020. But if you’re reading this, you still haven’t fallen off the face of the earth! The best thing to do is to ride it out and stop looking at your accounts. Try to maintain your budgeted contributions. It can be scary to keep contributing during these times but this will benefit you in the long-term. Avoid checking your balances daily and focus on your future goals.
Keep a limit to how much you check your bank accounts for a certain period. Whether it be once per day or every other day, imposing a limit can help keep your worries in check.
3. Increase your emergency fund
After reassessing your budget and cutting out unnecessary expenses, increase your savings as much as you can. If you are working on your debt snowball, you can slowly increase your savings each month. If you are out of debt, work towards a fully funded emergency fund of 3 – 6 months of living expenses. This not only allows you to have a cushion in case of a drastic life change, but allows you to feel less stressed, overwhelmed, and panicked about the current events.
4. Get scrappy
It’s time to get scrappy to increase your income or decrease your expenses. Are you outsourcing a job or task that you could do yourself? Perhaps your monthly manicure and pedicure were born out of a time in your life where you were doing really well financially, but now you might prefer learning how to do them on your own through a YouTube video. Getting a side hustle is also an excellent way to increase your income. Do you have skills that you could provide via Fiverr or Upwork? How about becoming a secret shopper and get paid to do tasks and run errands that you need to do anyway?
5. Get accountability
It’s hard to life alone. Find an accountability partner to help you stay focused during these unprecedented times. Check in weekly with your accountability partner on your wins and struggles. Check in with each other where you are stuck and brainstorm tips on how to overcome these struggles so you can get to your next step. Don’t have an accountability partner? The Budget Divas Community is here for you!
We’ve had it rough for the last two years, but you CAN achieve your financial goals with grit, elbow grease, and a ton of support from our community!