There are ways to survive a recession, even with limited funds.
COVID-19 has brought a global economic crisis to the forefront, and people everywhere are experiencing unemployment, furloughs, shutdowns, and decreased tourism earnings. Here are some strategies for dealing with a recession in your everyday finances.
By definition, a recession is simply a period of contracted economic growth. In the United States, the Gross Domestic Product has to decrease consistently for two straight quarters for it to be official.
With the months of sweeping business closures and record-breaking unemployment around the globe, a pandemic-related recession is undoubtedly on its way. The exact timing of it is still unknown, but the world's stock markets are already showing volatility amid the economic uncertainty. Here are some of the best tips from financial experts on how to weather the storm.
Start building a nest egg.
Instead of saving for a sweet retirement in a beach house, let this be your financial lifesaver. Many of us are spending less on weekly gas expenses as we work from home or children are distance learning. Transfer that to an easily accessed savings account and keep a bit of cash on hand.
Photo by Michael Longmire
Reduce, reuse, recyle.
This is a great time to take stock of your belongings. Getting rid of old clothes, appliances, or housewares is positively liberating. If you plan on donating them, make sure you get a receipt and take the tax writeoff. Better yet, sell what you can get online if your stuff is in good shape.
Now is not the time to be making big purchases if they are beyond your means. If you were to lose your job unexpectedly, having the latest cell phone in your pocket could end up being one of your biggest regrets. Make do with what you have until we are out of this economic slump.
While you're at it, do you really need over 200 cable channels? Take a long, hard look at your current monthly spending and see where you can make some cuts.
Photo by Karolina Grabowska
From a well-stocked pantry to a modest rainy day fund, the best thing you can do is to plan. Don't go overboard, but it wouldn't hurt to buy a few extra shelf-stable goods each time you go grocery shopping. You may be surprised at how good it feels to have that little bit of security in your cupboards.
Do your research.
Even if you don't need them right now, be aware of the social services in your area. Find out if your utlities offer payment deferments, and be ready to request extensions when you hit a tight spot. Try to chip away at high-interest debt as much as you can and make sure you're getting the lowest rates possible on your home and auto insurance. Sometimes, there are discounts that only a customer service representative can find for you. There's no harm in asking!
Just keep swimming.
If you do find yourself out of a job, try to think outside of the box. The gig economy is thriving with casual labor opportunities like delivery services and freelance work online. While it may not be your ideal way to earn a paycheck, it's still a means to an end.
Folks who have already been through major recessions and even the Great Depression are full of ideas on how to make a dollar stretch. While a "Victory Garden" isn't a realistic option for many of us, there are certainly ways to weather the hard times. This is a great time to examine your finances and build your own safety net.
Do you have any tips for recession-proofing your wallet? Share them with us in the comments!