From rising debt levels and fluctuating markets to dropping oil prices, every country today is facing a tough time. With most of the countries under complete lockdown, it is an alarming time to prepare for a recession. Every individual should know some effective money saving tips to survive a recession. However, it is worth mentioning that a recession is quite difficult to control. So, the least we can do right now is smartly planning to face and overcome the recession.
As a wise man once said, “prevention is better than cure”, it is high time to take preventive measures to protect oneself from a financial downturn that can hit our economy in the near future.
Take a look at the 4 effective and simple money saving tips to survive a recession:
Build An Emergency Fund
One may ask why it is important to save an emergency fund. It is because when the economy dips, the jobs and income will also be affected the same way. And when worse comes to worst, an emergency fund will help a person in multiple ways. In a nutshell, such funds are actually saved for financial hardships. With that being said, when your employer cuts a certain portion of your salary during a recession or you lose your job or as a company you are not making enough revenue, the emergency fund will help you to ride the wave and overcome the recession more easily.
So, you should try to save about 4 to 7 months’ worth of your salary, so when the economy goes down and inflows become tight, you won’t have to rely on your credit cards. One of the biggest mistakes you should avoid during a recession is using your credit card as a safety. It may surely help you in your rough patch but you cannot overlook the fact that it often haunts people for years.
If you haven’t yet started saving an emergency fund, you should start saving it before a recession happens.
Create a Budget & Clear Your Debts
Carrying debt is one of the biggest burdens today. And, during a recession when there will be no jobs and money is tight, these debt payments will only add up more stress. Hence, one should try to pay down all the debts before any financial downturn hits.
During a recession people struggle to meet even their day-to-day expenses and in this case debt payment can disrupt your peace of mind. So, try to not carry high levels of debt as it is very risky. You may be able to efficiently manage your payments today but nobody knows what happens tomorrow.
First things first, you should establish a budget to successfully pay down all your debts. A budget will help you to figure out all the unnecessary expenses that you can avoid and save a large chunk of money. This money can be ultimately used for repaying all your debts one by one. This is also a great way to manage your money smartly and efficiently.
Practice Frugal Lifestyle
Downsizing as well as practicing how to live frugally is also a great strategy to survive a recession. When you learn to live with less, your savings will eventually increase and you will not struggle to adapt to a new lifestyle during the recession.
Many may think that living frugally is very difficult; however it is not always. A frugal lifestyle doesn’t mean one has to pinch bugs and deprive himself/herself of things that bring him/her joy. Instead, it is about spending wisely and cutting down pointless expenses.
Although gig workers are a new reality still there are many people who rely on only one job. Frankly, these people will have to witness some serious consequences as when the economy tanks and people start losing their job, they will have no other source of income. This way one will struggle to meet even his/her basic needs. Keeping that in mind, having multiple streams of income is essential now. If any of the income sources start to dwindle or stop completely, you will have other sources to rely on. Income diversification not only means getting a second job but you can also try various other ways including renting out a room in your home.
We hope no country has to deal with a recession but at the same time we advise you to be well-prepared for one. Also, consider the aforementioned points to save money to survive a recession more smartly.