BeckyWhether we want to admit it or not, there’s a good chance we’re headed for a recession. Inflation is at an all-time high, groceries are expensive, gas prices are out of control! Let’s talk about what a recession is and 4 ways we can prepare for it!
A recession simply put is the economy shrinking 2 quarters in a row. Things like loss of employment, low wholesale-retail sales, lower industrial production, higher food costs and more expensive fuel prices generally occur.
So what are some ways we can avoid falling into a rut heading into a recession?
Save an emergency fund of AT LEAST 1 month
Regardless of a recession, it’s always a good idea to have an emergency fund. It’s recommended to have 3-6 months of an emergency fund saved up.
However, heading into a recession, even 1 MONTH of savings is better than nothing! If you don’t have an emergency fund at all, now is your opportunity to get started!
The difference between having an emergency fund and not having one at all is life-changing when it comes to life events happening.
Having an emergency fund has been a great blessing to my family. Although it took a lot of time and dedication to build one, it’s worth it when we know emergencies occur all around us.
Allow me to give you some examples of our “everyday life”. Last year our HVAC unit broke during the hottest week of our summer. Then, this spring our standup shower leaked into the shared wall behind our front door causing water damage to our baseboards.
If we didn’t have an emergency fund, I don’t know what we would’ve done in either scenario. We were able to dip into our emergency fund in both instances to get things fixed as quickly as possible and then build our savings back up shortly after.
The amount of peace an emergency fund has given my family is worth the sacrifice! If you don’t have one yet, make this a priority NOW.
Stick to a budget
If you’ve been following along with this blog for any amount of time, you know I’m a huge proponent for budgets! A budget has given my family so much freedom.
There’s no guessing, hoping and praying that we’ll have enough to make it to the end of the month. We know exactly how much money we have to spend on things like groceries, gas and even sinking funds for future expenses coming up.
The benefits of a budget far exceed a recession. Regardless, if you can stay disciplined enough to follow a budget, you’ll survive a recession!
Think of the advantage you’ll have by sticking to a budget. A budget will show you exactly how much will be coming out of each paycheck and help you save money. Did you read that??? You’ll be able to SAVE when some people can’t even pay their bills in any given month!
Pay down debt
Aside from saving up for an emergency fund, paying down debt is the next best thing you can do. Think of the freedom you’d have if you had no debt going into a recession!
Yes, maybe things would get tight in your budget, but you wouldn’t have to worry about paying anyone else. You could focus on the necessary expenses in your budget, make changes where needed and save money or travel or do whatever your heart’s desire is!
If you already have an emergency fund saved up, your next move is to start paying down your debt as quickly as possible.
Check out this post where I explain how my family paid off our debt!
Paying down debt might seem like a scary thing to focus on while in a recession, but it gives you more leverage in the long run.
Bring in extra income
I know bringing in extra income can get tricky during a recession. Hours get cut, people get laid off and everything seems uncertain.
However, a little extra income could make it or break it when your finances are facing a recession.
Even doing small things like selling items you don’t use can help bring in some extra money to put towards your emergency fund or pay down debt.
There are so many side hustles available these days. You could make a little cash doing Instacart, Uber, lawn care, pizza delivery, babysitting, pet-sitting.
Even an extra $100 per week could help a budget drastically!
Survive an impending recession
You can’t always control the economy or who is in the white house, but you CAN control what happens to your money and how you handle it.
By gaining control of your finances, it won’t matter if the economy is in an upturn or a downturn. Being financially independent ultimately gives YOU the final say in how you’re going to react to an impending recession.
