When the economy is uncertain, and recession fears are rising, it’s natural to feel a sense of anxiety about your finances. However, it’s important to not panic, and instead, take proactive steps to safeguard your financial stability. Here are some money moves you can make when worrying about a recession.
Evaluate Your Budget
Take a close look at your budget and identify areas where you can reduce spending. Look for discretionary expenses like eating out, subscriptions, and entertainment, and find ways to reduce or eliminate them. This will free up cash to help you build an emergency fund and prepare for potential income disruptions.
Build an Emergency Fund
Having a solid emergency fund is crucial during uncertain economic times. The fund should ideally cover at least six months of living expenses, and it should be kept in a separate account that’s easily accessible. Consider setting up automatic monthly contributions to your emergency fund to help you reach your goal.
Diversify Your Income
If you’re reliant on a single source of income, now may be an excellent time to explore other options. Consider taking on a side hustle or freelancing to diversify your income streams. This will help you reduce reliance on a single employer and give you more financial stability.
Review Your Investments
Market volatility is common during a recession, so reviewing your investments and making any necessary adjustments is a good idea. Consider diversifying your portfolio by investing in a mix of stocks, bonds, and other assets. However, it’s important to remember that all investments come with risk, so consult a financial advisor before making any major changes.
If you have a mortgage or other loans, you might want to refinance when interest rates go down during a recession. This will save you money on interest over the life of the loan.
Avoid Panic Selling
It’s natural to feel anxious about your investments when the market is volatile, but it’s important to resist the urge to panic sell. Historically, the stock market has always recovered from downturns, and selling your investments during a downturn could result in significant losses.
Seek Professional Advice
Talk to a financial advisor if you're unsure how to deal with a recession. They can help you evaluate your financial situation and provide guidance on protecting your assets.
Consider downsizing if you're living in a house or apartment that's too large for your needs. This can help you reduce your mortgage or rent payments and save on utilities and maintenance. If you own a car, consider downsizing to a more affordable and fuel-efficient model. Downsizing can help you reduce your housing costs and save money on utilities and maintenance while being a more sustainable lifestyle choice.