In that period unemployment increases but people with fixed incomes or cash savings are safe. Read about “Take Control of Your Finances”
A recession is a period of temporary economic decline for at least six months and during that period trade and industrial activity are reduced. Recession can be identified by a fall in GDP in two successive quarters. During a recession as trade is declined so there are fewer jobs, people are making less money so they have to be cautious in spending.
In that period unemployment increases but people with fixed incomes or cash savings are safe. Business suffers a lot it slows down or stops and the economy struggles. Now it is important to discuss how we can take control of our finances in recession. We’ll discuss ten ways by which people can survive by controlling their finances in a recession.
1. Avoid investing in property
This is the most important thing, as the recession period is unpredictable so it is not a wise idea to invest your money in that period. Builders and housing finance companies are busy luring buyers with big discounts and low loan rates but it is necessary to take hold to control your financial condition. You can buy for immediate use and you shouldn’t plan to invest in a second property in hunger for higher returns. The second thing is don’t take a loan to buy the property as you will be under piles of debt in this case. So it will help to save money for recession.
2. Create an emergency corpus
It is very important to create an emergency corpus as if your job is going, an emergency fund is very necessary. You can take the first step to your financial plan by building a kitty for medical or financial emergencies. But during emergency phases that fund can be insufficient, so the corpus should be capable of supporting at least six months’ expenditure. That emergency corpus will surely help in those tough days of the recession.
3. Maximize Your Liquid Savings
Your cash accounts like checking, savings, and money market accounts, and certificates of deposit (CDs) can help you the most in a financial crisis. As their value doesn’t fluctuate with market conditions, so you can turn to them when needed. Without incurring a financial loss it is possible to take out your money. You don’t have any need to invest in stocks or other higher-risk investments until and unless you have several months’ worth of cash in your liquid accounts. You have to decide how much amount you should have in your liquid account. So it’s a better idea not to invest in a risky organization be wise and save your money by maximizing your liquid accounts.
4. Make a Budget
This is highly recommended to make a budget as by making it you documented your income and expenses so you can make wise decisions where to spend and where to not. If you don’t know exactly how much money you are earning and how much and where you are spending each month, you won’t know how much money you should keep for your emergency especially recession. Another point is that by not making a budget you will never know whether you’re currently living below your means or out of them. So it is very necessary to budget your money so you will able to save something regularly for a difficult time.
5. Closely Manage Your Bills
People should be able to maintain their finance by managing their bills. As some people face difficulties with late fees or finance charges. It is suggested to be organized and save that money that is spent on late credit card payments. If you forget your bills you can set a specific date each month to review all your accounts, so can’t miss any due dates. Second thing is to lessen your unnecessary bill.
You have to look at your budget to see where you are spending more money than necessary then you can make a plan to start cutting your costs to save money. You should also be vigilant at home, don’t let the heater or air conditioner run when you’re not home, or don’t leave lights on in rooms you are going out of the room. These habits can trim your utility bills. This will prove very beneficial in managing your finances.
6. Pay Down Your Credit Card Debt
Your credit card debt takes up a significant portion of your monthly budget in the interest charges you’re paying every month. If you stay with to pay down your credit card debt, you will reduce your monthly savings. So it’s a wise decision to getting rid of interest payments that frees you to invest your money toward more important things.
7. Get a Better Credit Card Deal
If you are using a credit card and you are holding a balance also so you can transfer that balance to another card at a lower rate. As you will have to pay less interest it means that you can pay off your total debt faster. One thing is to keep in mind that make sure that the balance transfer fee shouldn’t be greater than what you save from the lower interest rate. When you are transferring your balance to a new card with a low introductory annual percentage rate (APR), you have to pay off your balance during the introductory period. Instead of transferring money to a new credit card, you can ask your current credit card company to lower your monthly interest rate. Companies will surely do this to keep the customer. So this method can also save some money for the crisis.
8. Look for Ways to Earn Extra Cash
Everyone has to do to earn extra money; there are many ways you can sell your possessions that are no longer in use, babysitting, freelancing, or any part-time second job. This extra earned money may seem insignificant but this can add some useful amount to your total income. Nowadays many online works can make you enable to earn a tremendous amount of money with no time restrictions. The freelance market is now very encouraging especially for youngsters who are struggling. So they can make extra money and save it for the future that will help them in their unpredictable financial crisis also.
9. Check Your Insurance Coverage
It is highly recommended that shop around for lower insurance rates. You can lower your monthly bills by carrying too much insurance. You have to look for the same coverage from another provider for a better price so you can save some money from this. It is very important to have good insurance coverage that protects you when the time comes just as a disability insurance policy can be indispensable if you have a long significant illness or an injury that hurdles your working so this can help you very well.
10. Keep Up With Routine Maintenance
It is very healthy to keep your things, home, and physical health in tip-top condition. You can keep your life balance by maintaining the routine as it is good if you take care of your health by eating a healthy diet and exercise then it will help you to save those expenses that would be spent on medical bills later. You also have to maintain your other daily things as if they damaged then can cost high expenses in repair so it’s a better idea to keep them maintained if you don’t have the time or money to deal with these things regularly, then it can be dangerous as it can cost heavy bills later.
As life is highly unpredictable, but we have to stave off disaster no matter what happened. So we have to be prepared and careful as with the right preparation and set goals it is possible to turn a potential financial tragedy into a minute temporary setback. By following above discussed ways it is possible to manage your finances so you can handle financial crises or recession.
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Haley Hayward is an experienced writer at financemag7.com, where she’s credited with more than 200 articles covering everything from entrepreneurial stories to mental health at work.
She also oversees the Comment&Questions, which poses important admission questions to experts in the field, and regularly hosts webinars on various aspects of the business school experience.
Prior to joining financemag7.com, Haley honed her skills as a freelance writer, tackling a wide array of topics from petcare to car maintenance.
Haley holds a Master’s degree in English Literature from the University of Edinburgh, Scotland.