The outbreak of Covid 19 has impacted all aspects of our life.
We are not just forced to stay at home, hampering the day to day activities, but it has jolted the global economy too.
With the world economy moving towards a lockdown, fear of pay cuts and job losses are looming high.
Economists predict that recession is imminent.
Thus, it is crucial to be proactive with your finances.
Here are some tips to recession-proof finance and make you strong enough to bear any storm.
Monitor your Expenses
You must monitor your daily expenses to get an estimate of cash flow.
Track the money you are spending and separate the discretionary costs from fixed costs.
This will help you sustain during recession.
Monitoring expenses will also help you avoid the high but avoidable expenses during recession.
Stick to Budget
You have a monthly budget. Right?
If you don’t have one, create it right now.
Next, stick to it and do not go overboard.
Living within your means everyday is very important if there is a recession.
You must have an upper limit to the amount you are spending. Otherwise, it may be hard to hold yourself back even if you do not have the capacity to spend more.
If both you and your spouse are earning, manage all expenses in one of your earnings.
This will help to have an emergency fund and you can remain prepared in case one of you is laid off as well.
Clear Your Debt
Clear all outstanding debt, especially the high-cost ones so that you can create a breathing room in your budget.
If you are worried about losing your job, paying off debts will ensure peace of mind.
First, clear your credit card debts and then you can move on to other types of loans. Student loans are in a favourable position thus, you need not hurry to pay them off. Even if you are not afraid of losing your job, taking these steps will help you in the long run.
Though it is quite tempting to make investments, it is advisable to have some ready cash.
In case of an emergency, easily available cash is helpful.
The whole idea behind emergency funds is having easily available and ready cash.
Keep the cash in your savings account.
Yes, it is tempting to invest the amount and see it grow, but investments come at a risk and the money may also decrease in value.
You can keep the amount in high-yield savings accounts so that it grows risk free.
Think Long Term
If you are really bent on investing some of your money, think long term.
If the market goes down, you must be in a position to hold on to your investments rather than selling them off.
In the long run, you will get the opportunity to sell them off.
Have the patience to wait till the market turns around once again.
If you are nearing retirement, invest in low risk or liquid accounts that you can access whenever required.
With the existing economic scenario, another recession is almost inevitable. So, carefully plan your investments, finances and savings to make the scenario less challenging.