It has been a difficult year in the financial world. COVID-19 took the world by storm, causing institutions and businesses all over the world to shut down. International Monetary Fund (IMF) projections suggested that this recession will be the worst global economic downturn since the Great Depression and that it will be “far worse” than the Great Recession of 2008-2009. There is no denying that the consequences of this massive economic downturn trickled down to individuals.
Despite the alarming projections, there are still ways for us to save money during the recession. Here are a few simple ways to recession-proof your finances.
Cut back on expenses.
One simple way to save money during a recession is to identify where you can cut back on regular expenses. It’s always a good habit to go through your monthly expenses and see which services are optional and which ones are necessary.
Some optional expenses you can downsize or cut back on include:
1. Phone plan: many service providers have hidden charges and regularly raise their fees without informing customers
2. Additional entertainment services like cable TV and other streaming sites
3. Other paid subscriptions like mobile apps or online journals
4. If you have two vehicles, consider cutting down to one, especially if you’re working from home.
These extra expenses may not seem like much, but cumulatively they can make up for a huge amount of what we spend on regularly. Cut back where you can and see how much you can save by downgrading.
Live within your means.
No matter the state of the global economy, the building blocks for saving money never changes: Spend less than you earn and invest or save what’s left.
It may sound simple, but creating a budget and sticking with it can make a huge difference. We have to eat; we have to live; we have to pay rent; we have to pay car insurance; we have to pay for groceries and utilities-those are essential expenses. But dining out and vacations are luxury or lifestyle expenses that we can do without for now. Experts recommend not spending more than 30 percent of our net (earnings after taxes and other cuts) income on our wants.
Look for a recession-proof job.
A recession-proof job is a job that we are likely to find even during difficult economic times. These are jobs that will always be in demand because they are essential for the normal functioning of society. Some examples include jobs in fields like health care, law enforcement, education, financial services, and various computer-related occupations.
Some industries fall into the category of luxury spending, such as travel and other leisure activities. During a recession, it’s best to avoid jobs or businesses in these industries as they are always the first to suffer.
Diversify your income.
Many people lost their jobs during the pandemic, leaving them with no financial security.Having multiple streams of income helps insulate yourself from risk should your main source of income be taken away, especially in a recession.
One upside of economic downturns is that they pave the way for startups to find success. Consider starting a small business based on your skills. If you’re good at cooking, try your hand at making simple homemade meals and dishes and market them online. Leverage your unique skills and create a portfolio to promote your work. Look for online trends and see if you can get your slice of the pie.
If you have plenty of time in your hands, consider finding a side hustle you can do on the weekends, like driving Uber or babysitting. While these may be riskier options during a pandemic, there might still be a demand for them in places where infection rates aren’t as high.
Limit your debt.
It’s always wise to pay off your debts on time, every time, regardless of the condition of the economy.If you have credit card debt, pay as much as you can or at least settle the minimum due each month.
If youhave built a good credit history throughout the years, it’s important to protect it, especially in a recession. Good credit gives you the financial power to get a hold of goods and services when you need them. Make a habit of checking your credit score to keep an eye on your reports year-round.
Things May Get Worse Before They Get Better
We may be experiencing the full effects of the coronavirus pandemic for years to come, and it is vital now more than ever to always prepare ourselves for the worst. Tough times never last, but tough people do, and now is the time to do all that we can to protect ourselves and our loved ones from the effects of this recession.
