The
majority of economists think that a recession is right around the corner. It’s
not a question of “if” but rather “when” it will arrive. This isn’t rocket
science since research suggests that every six-seven years, the US has a
recession of sorts. Given the boom of recent years, it’s pretty straight
forward, “what goes up must come down.” If you want to learn more why
executives and chief financial officers are worried, check out What is a Recession, and Why Are People Talking About the Next One?
By
organizing now, a recession will not be as damaging as it could be, regardless
of when it hits and for how long it stays around. If you do it right, you wont
have to pay much attention in future years to what the economy is doing because
you’ve developed a “live below my means” mentality, that can help you weather
recessions and crisis.
For
clarification to “live below your means” is that you basically spend less money
than what you bring. It means you don’t live pay check to pay check but rather
adopt a life style that at the very least lets you live within your means, but
more importantly, let’s you save money each month.
GET FINANCES IN ORDER
• Got Stock? Turn off the
news: If
you have stocks you don’t need to be checking them daily. In the last
recession, many learned of the largest daily decrease (11/29/08) sold their
investments when the market plummeted only to miss the largest stock market
increase just two weeks later. As my father in law, who was an economist and
made his living as an investor, would say, “stocks are a young man’s game.”
• Stop using credit
cards: If
you are paying for things you can’t afford, you are living above your means.
• Evaluate what you do for
a living.
Unless you are planning retirement in the next several years, it’s important to
examine what you do for a living and try to determine if it’s recession proof.
Certain jobs will always be needed but others come and go with the economy. Employers
keep those who they view as the best “Return on investment.-“ productivity
levels make or save the company money. Make sure your resume is updated and you
are well networked in your field. Acquire new skills and keep yourself relevant
if not indispensable.
• Even if you think your
job is secure, consider a side hustle. Do you have special skills you can do on the side
or teach? Check out Side Hustle Nation for lots of ideas.
• Do you have an emergency
fund? Can
you survive if you don’t draw a paycheck for six months or even longer? Even if
it’s emptying pockets and purses at the end of the day, checking sofas and
chairs and dumping all loose change in a bucket, start saving. Every dime
counts in a weakened economy.
• Refinance and pay
off high-interest debt: If you have student loans at a high interest rate,
refinance them to a fixed lower rate now. Do what you can now to pay off loans
and get debt under control now
• Don’t buy what you can’t
afford or what you don’t understand. People get trapped in loans they really can’t afford
with interest rates that can be variable as well as balloon payments. If you
need to borrow money, make sure you understand what the terms of the loan are
before you sign.
• Be the boss of your
money:
Assign a job for every dollar you bring in. Depending on your financial
situation, divide money into the following categories monthlies (what you have
to pay each month such as utilities, rent/mortgage, food, gas); need (something you need and are
saving up for); debt repayment and savings.
• Pay Yourself: When you’ve finished
paying off school debt, mortgage, smart phone or whatever else, keep making the
payment but this time to an interest bearing savings account.
• Live off one income: All to often we match our
lifestyle with the income we’re making. However, setting things up so one
income is used for monthly living expenses , while the second one pays off
debt, invests or goes into retirement. This approach can be a major help if one
of you looses a job during the recession.
LIVE BELOW YOUR MEANS: Having done a variety of
posts on this topic, below are resources to help you “Use it up, wear it out,
make it do or do without.”
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