Recent headlines might have you on edge. You can’t go a day without hearing that a recession is on the horizon. It’s hard to believe that it’s only been a little more than a decade since the recession of 2008. Back then I was still living at home with my parents and not financially taking care of myself. With word of another one coming, I want to make sure my husband and I are financially prepared to weather the storm. So, how do you prepare for a recession? From cutting excess expenses to building up your rainy-day fund, here are six financial moves you can make to stay afloat if the economy slows down.
- Trim the fat. Do you really need Netflix, Hulu, and cable? Or to pay someone else to mow your lawn every week? How about that FabFitFun subscription? Now might be a good time to figure out what’s an essential expense and what you can let go.
- Increase your emergency fund. If the economy does take a dip, it’s a good idea to make sure you’ve socked away as much as you can for a rainy day. We are currently using our High Yield Online Savings account because it’s easy to manage online and we get away better rate on it than a traditional savings account. Which means we make more money on our money. Smart, huh?
- Cut your debt but have a backup. If your income shrinks, you won’t want to be on the hook for expensive debt you have to repay. Start paying off those high rate credit cards but leave them open so you have access to them in the future if you need it. You could even transfer your balances to a low rate credit card to help you pay them off faster.
- Zero in on your 401(k). If you reduce your contributions to your 401(k) and choose to put that money into a savings account instead, you could lose out financially in the long run. Keep contributing to your employer-sponsored retirement plans and IRAs. Having it automatically taken out of your paycheck every month makes it feel like you never had it in the first place. So, keep everything the same to ensure at the end of all this you have something to fall back on. You are in it for the long haul.
- Consider investing in CDs. Certificates of deposits (CDs) are safe havens for and can protect large gain investors from losing money in the stock market. Yes, it’s true that you might not gain as much, but you could also not lose as much. The pain of losing money is much greater than the joy of making money. CDs at the credit union are federally insured up to $250,000 by the National Credit Union Administration (NCUA).
- Stay on the job but stay prepared. If you’ve already built up a track record at your current job, you might not want to start looking for a new gig during a time the economy is stuttering. But just in case layoffs loom, it’s a good idea to be prepared. Make sure your resume is polished and stay on top of the connections you’ve made. You never know what you may need in times of trouble.
To put it simply, spotting a recession before it starts is a difficult task. Information is often revised, updated and corrected. Even so, developments shift rapidly. Whether a downward turn happens in the next year or not, it’s important to be financially prepared. Plus, if the recession doesn’t hit, think about all the money you have saved along the way.