Worried about how your finances will look in a year or even a few months? With all the worries about economic growth, it’s reasonable to worry about a potential recession.
But the bottom line is that if a recession hits in the next 6-12 months, start preparing now to be in the best position with your money.
As a candidate of business sciences. and managing fintech entrepreneur million dollar companyI challenge everyone I meet to remember that recession can present opportunities get your finances in order.
Here are my top 18 recession money rules to increase your chances of surviving an economic downturn:
1. Create a 12-24 month emergency fund. In a stable economy, experts recommend saving three to six months of living expenses.
But CFP and wealth advisor Catherine Valega suggests that employees aim for 12 to 24 months if they’re laid off.
“I tend to be more conservative than most because I’ve had three to six months of emergency expenses and I don’t think that’s enough.” he told CNBC in may
2. Minimize high interest debts. Call your card issuer to see if you can negotiate your credit card interest rates. Think about how you can make a strong case – perhaps you’ve been with them for a long time or have a good history of on-time payments.
If interest rate reduction isn’t an option, consider moving your debt to a lower interest rate card. Or you can consolidate your debts to lower your monthly payments and free up capital that may be needed in an emergency.
3. Prepare to borrow. During a recession, many people need to borrow money to get through the tough times—and that’s okay. But when interest rates are high, lenders will take a hard look at your credit score, making it harder, if not more expensive, to get approved for loans.
So create a plan to boost your credit score. Making payments on time and keeping balances low are the most important factors when it comes to building credit.
4. Keep your credit accounts active. Now is not the time to panic and cancel your credit cards. The age of your accounts is a factor that affects your credit score. Even if you transfer your balances, keep your credit cards open.
according to Equifax, credit scores of 580 to 669 are considered fair; 670 to 739 is considered good; 740 to 799 is considered very good; and 800 and above are considered excellent.
5. If your mortgage is due, renegotiate now. The average fixed mortgage is 30 years almost doubled from last year. No one knows for sure if this is the highest point at which rates will rise, but locking in a lower rate now can protect you.
6. If you have a low-interest mortgage, stay put. Many people believe that paying off debt during a recession is a smart idea. But I don’t recommend it. It may be better to make minimum payments and keep cash handy.
Why? Because if the worst costs happen and you lose your source of income, the money you save can help you recover until you regain financial stability.
7. Buy in bulk if you can. Anything you need today that is a cost savings that you will use in the future will save you more money later if inflation continues.
Non-perishable staples such as toilet paper, toothpaste, shampoos and soaps, and even canned foods, make large bulk purchases.
8. Prefer frozen products. If you always buy fresh fruits and vegetables, consider buying frozen. Often there are products found in the freezer section so much healthierit will last longer and cost significantly less.
9. Buy from generic brands. Items such as trash bags, light bulbs, paper, makeup, shampoo, pet food, canned goods, and other grocery items can often be purchased at a lower price and generally offer the same product.
10. Consider the price of gas. If you’re shopping or running errands, figure out how you can handle multiple tasks in one trip instead of multiple trips. If your purchase doesn’t have free shipping, opt for ordering instead of driving to pick it up.
11. Build your emergency fund before investing. Don’t start long-term investments until your emergency fund is established. Loss of income can put you in debt, and high-interest debt can prevent investment returns.
12. Invest in recession-proof industries. The fear of buying the wrong stock can be reduced by investing in well-known, well-known businesses. Investors may want to consider sectors that generally do well in an economic slowdown, such as consumer staples, utilities and health care.
CNBC’s Jim Cramer in June awning “Mad Money” watchers say his advice during a downturn is to buy “material” stocks: “You want to own companies that do real things and do real things, and make a profit in the process.”
in another segment, he said, “food stocks can become recession-proof safe havens.” Some of his favorites are General Mills, Kellogg’s and Campbell Soup.
13. Look for negative correlations. Diversify your portfolio by buying asset classes with low or negative correlation in pairs. This can help minimize the amount of money you lose in the short term if stocks continue to fall, as one asset class tends to appreciate while another declines.
14. If you’re considering a career change, look for it recession resistant positions. While no job is completely safe during a recession, some jobs, such as essential services, offer more security.
Think: medicine, teaching, law, accounting, public safety, utilities, waste management, and other jobs that keep society functioning.
15. Create additional sources of income. One of the biggest risks consumers face during a recession is loss of income. Eliminate this risk by taking on an extra job. You can find a second, hourly job with flexible hours (like bartending or waiting tables, two occupations that currently have a lot of jobs).
Or you can start side hustle Through gig apps like Uber, TaskRabbit, Instacart or Rover. Renting out your property (or even a spare room in your home) either to a tenant or through a holiday agency is another way to generate a predictable income stream.
16. Resell your items. second hand dealers flourished During the Great Recession. Sell the things you no longer use to thrift stores. To cut out the middleman, you can list products online on a marketplace like Poshmark, eBay, or Kijiji.
17. Increase your market value. Improving your skills or furthering your education will make you more marketable during a tight job market. Sign up for classes, attend workshops, volunteer – the soft and hard skills you acquire will add a lot of shine to your CV.
18. Don’t panic – recessions don’t last forever. If you lose your job or your income changes, you may have to downsize significantly or spend an emergency fund, but you can always build it back up later. Since 1900, the average recession has lasted approx 15 months.
Ann Kaplan He is the founder of iFinance, the parent company of Medicard, Petcard, Dentalcard, iFinance Tech and iFinance Home Improvement. He holds a PhD in finance and an MBA from the University of Toronto’s Rotman School of Management.
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