Things have been going pretty great in our economy for a while and now there is
Whether or not there is any way to accurately predict when a recession will hit, there is no doubt that one will eventually be upon us. It’s been almost 10 years since our last recession and if we could survive that, we can survive the next one. But how?
Here are 10 moves you can make today to help you financially prepare for a recession no matter when it might hit.
*This post contains affiliate links. I may earn a commission on recommendations at no cost to you.
Get totally financially informed
The best way to manage your money, especially when you are trying to prepare for a recession, is to know exactly how to make your money work for you.
One of the smartest moves I ever made was to learn how to better my finances, live on a budget and get an understanding of how to make money work for me instead of against me.
If you are tired of the paycheck to paycheck lifestyle and you don’t want to keep guessing the best ways to manage your money, click here to check out The Bucket List Budget. In this course, I will lay out all of the financial tools it took me over 5 years to master. That way, you can get ahead of the game!
Additional financial resources:
- Create a Simple Budget with a Piece of Paper and a Smartphone
- A Beginner’s Guide to Fool-Proof Zero Based Budgeting
- How Do I Plan for Retirement as a Stay at Home Parent?
- How to Stop Taking Money Out of Savings
Slow your debt payoff
Getting our family out of debt was one of the best things I have ever done. However, during a recession or when times are financially unstable, a good idea is to slow your debt payoff.
There are, however, a few things you can do to potentially lower your monthly payments and reduce the amount of money that you pay back in the long run.
Quick tips for reducing monthly debt
Reducing your monthly debt (and overall interest rate) can help you free up money each month to put toward saving instead.
If you have several debts, especially credit cards with high-interest rates, you could get a lot of relief from debt consolidation. Not only can you get lower interest rates, but a lower monthly payment as well. Look into consolidation options with LendingTree.
Negotiate your interest rates
There are a few ways that you can lower your interest rate besides debt consolidation and that’s through negotiating or balance transfers.
Grab my FREE Maximize Your Negotiations Scripts to get the word for word script of what to say when you call your credit card company to negotiate your interest rates.
2 tips for negotiating interest rates:
- Ask to speak to a manager right away.
- Know the interest rate you’re wanting — don’t ask.
Secure your emergency fund
When a recession hits, things can get really rough and job losses start happening. That’s why it’s super important to prepare for a recession by starting to save as much money as possible. Tips for saving $1,000 fast.
Best places to save
I recommend using an online bank to build your savings for two major reasons.
- It’s hard to withdraw funds when it’s not connected to your regular account. Although technology has made it very easy to access our money no matter what.
- Online banks offer higher compounding interest rates than regular banks do.
Getting paid to save
One of my top recommended savings accounts to help you not only save money but get paid a high-interest rate is the Savings Builder through CITBank.
It only costs $100 to open a Savings Builder account and you get locked into their highest interest rate when you set up automatic deposits of $100 per month. This is truly amazing because most banks require a minimum deposit of $5,000 or so. Click here to open a Savings Builder account today.
Trim the fat in your budget
Another important thing to do in order to prepare for a recession is to start practicing frugal living now. 5 Ways to Instantly Boost Your Cash.
Apps that help you cut back:
- Charlie – Charlie is a handy savings tool that reviews your spending and lets you know where you might be over-doing it or where you could be saving more!
- Trim – Trim is a great app that looks at your monthly bills then looks around for cheaper prices. In fact, within 1 hour of signing up, Trim had saved me $20 on my internet bill!
Genius posts for reducing your spending:
- 40 Ways to Reduce Your Monthly Bills
- 10 Ways to Reduce Your Phone Bill Up to $500 Per Month
- Best Budget Practices for Your Paycheck
- 22 Things You Can Negotiate to Save Money
Sell now if you’re struggling
You can work and save to build up an emergency fund, but you still may find yourself struggling to get by. If that’s the case, it’s time to consider what you might be able to sell.
Three years ago my family and I accepted the realization that we were house poor and in desperate need of change. We sold our house and paid off our debt so that we wouldn’t feel financially vulnerable anymore.
If you need to sell your house
You can get connected with realtors in your are right now. This is a great way to get an estimate on what your house is worth and will help you get an idea of what houses within your price range might look like.
Selling a house is never an easy thing to do, but if you are already feeling at risk, it might be one of the smartest moves you can make.
If you need to sell a vehicle
Some people have vehicle debt payments larger than the cost of their mortgage or rent. This is insane!
You should not be going broke month after month because of a car or other vehicle. While there is always the option of refinancing your car to get a lower monthly payment, the best bet is to see if you can sell it and pay off the remainder of your current loan. Why you shouldn’t refinance your auto loan.
Evaluate your 401K
Making sure you have a diversified 401K portfolio is one of the best ways to prepare for a recession. Doing this helps to make sure you keep your retirement financially secure.
If your employer offers access to a financial advisor, set up a time to meet with them so that you can make sure you have the best 401K portfolio possible.
Don’t trust that your employer has set up a solid 401K for you! That’s not their job, it’s your job.
My best advice to you is to read this great article on Forbes about How to Recession-Proof Your 401K.
Should I drastically change my 401K?
The best advice is that a potential recession does not mean you should panic or drastically change your 401K. Instead, make sure you are fully informed on where your funds are going so that you are set to sustain any potential recessions.
Your 401K during a recession
During a recession, it is so important to remember not to panic over your investments (like your 401K). Consult with an expert if necessary, otherwise, hunker down and keep your eyes focused on building your liquid cash.
Make sure you’re networking
Unfortunately during a recession, we all know there is a chance of job losses. Even if you are not currently seeking new employment it might be a good idea to make sure you are active on platforms like LinkedIn.
This is a smart move to make so should you experience job loss during a recession, you have a greater potential for finding new work quickly.
Work with a financial advisor
Each person is working with a unique financial situation. While it is super important to be informed, and to access your employer’s financial experts, sitting down with a financial advisor is another smart move you can make.
Choosing a financial advisor
There are books I really loved that helped clear up so many financial gray areas for me. Those books are:
Never before did I consider that choosing a financial advisor would be a strategic move on my part. I want to share with you the 7 questions Tony Robbins suggests you ask potential financial advisors.
- Are you a registered investment advisor? – You want a “yes.”
- Are you or your firm associated with a broker-dealer? – You want a “no.”
- Does your firm offer proprietary mutual funds or separately managed accounts? – You want a “no.”
- Do you or your firm receive any third-party compensation for recommending particular investments? – You want to make sure your investor isn’t receiving any kickbacks for recommending certain products to you
- What’s your philosophy when it comes to investing? – Avoid anyone who thinks they can beat the market
- What financial planning services do you offer beyond investment strategy and portfolio management? – Make sure they are aligned with your particular financial situation and stage in life
- Where will my money be held?
Make your insurance works for you
One major financial area that most people overlook is their insurance. Making sure you are getting the best insurance coverage is crucial at every point in time, not just during a recession.
A major area that is overlooked when it comes to insurance is disability insurance. The scary truth is that 50% of bankruptcies and foreclosures are due to people not being able to pay their medical bills! Make sure you are covered — get coverage starting at $9 per month.
Here is a quick run-down of the insurance coverage I made sure my family and I had. It’s crazy how one tiny mistake could actually cost you a million dollars.
Avoid new debts
I hope it doesn’t need to be said that if you should quick about paying off your debt, you should also be avoiding incurring any new debt.
This includes things like new vehicles as well. Often times when a car starts to go out, people will just finance a new one. In some cases, this may be your only option, but don’t overlook the idea of getting the old one fixed or saving up for a new one.
Prepare for a recession by being hyper-aware of your finances and avoid adding any additional monthly costs to your expenses.