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People find themselves in uncharted waters in every recession, and no two downturns are exactly alike. Global growth is expected to slump to 2.9 % in 2022, according to the World Bank’s latest Global Economic report. A looming recession casts doubt on any future plans you may have, but through some savvy strategic planning, you can weather the recession and build up financial resilience as well. To reduce your exposure to financial risk, here are some ways you can recession-proof your life, courtesy of Savings and Sangria.
Budget Management
A budget is more than just a number. Here are some things to remember when setting your family budget:
- Plan your budget. Determine how much money you need to earn to cover essential spending and monthly bills.
- Live within your means. Cut down on unnecessary expenses such as eating out.
- Establish emergency savings. If possible, save for six months’ worth of bills.
- Know your credit score. Keep your credit score high and pay off your debt while economic conditions remain favorable.
- Live off one income. If you are a two-income family, see how close you can come to living off only one salary.
- Take advantage of free resources. Whenever possible, use free tools available online rather than purchasing expensive programs. For instance, if you’re working with PDFs and need to extract one particular page, by using a PDF extractor you can get that content in moments.
Invest in a Home Warranty
While it may seem counterintuitive to add another monthly expense to your budget, investing in a home warranty plan is something you should consider. Take the median cost of your home, then apply the often-cited rule of setting aside up to 4% of your home’s value.
Not to be confused with home insurance, a home warranty covers costly repairs and breakdowns to big-ticket items such as home cooling, heating, electrical and plumbing systems, and appliance repairs.
Look Into Refinancing Your Home
Investigate the possibility of refinancing your mortgage. Generally, mortgage rates fall during a recession, so it may be time to lock in a lower fixed rate during an economic downturn.
Investigate Alternative Streams of Income
Many people turn their skills into recession-proof businesses to provide extra financial stability. Here are some options:
- Freelancing. Large companies looking for ways to cut costs do so by hiring freelancers. From finance and accounting to virtual assistant services, the internet has many sites dedicated to freelance work.
- Home Repairs. Some people are handy at fixing garage doors and leaking roofs; others are not. There will always be a niche market for handyman repair services.
- Online Reselling. Online reselling sites surge in popularity during a recession as consumers look for quality clothing and items at a good price. Setting up an online site will expose you to a much wider potential market.
- Real Estate. A recessed market is the best time to get a good deal on investment properties. And with 18 different ways to invest in real estate, there’s an option for every budget and every goal.
It All Comes Down to Strategic Planning
While the projected economic downturn is not necessarily ideal, it can create opportunities for growth and change — such as turning your skills into a recession-proof business and investing in a home warranty or mortgage refinance. A recession may be beyond your control, but you can control how you prepare to navigate tough financial times.
Savings and Sangria is your best resource for happy money management. Have a question? Let us know!
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