Winter has come, and a recession is coming. You might not want to be confronted with the thought of an economic downturn, but there are positive ways you can recession-proof your finances and safeguard your financial future.
Here are eight ways to recession-proof your finances:
- Pay off your debts
- Start a rainy day fund
- Think about the ways you can cut back
- Talk to your friends and family about money
- Focus on the future
- Marie Kondo the non-essentials
- Invest in yourself
- Look to the future but enjoy the present
Pay off your debts
Whether you owe your friend a fiver or the bank five grand, planning out small measurable goals to pay off your debt is something you should be prioritising, especially in times of uncertainty. If you pay off your debts now, it increases your chances of getting a loan in the future if needs be. More importantly, it gives you some space to breathe in an unstable job market.
Start a rainy day fund
If you are still working and stable in your job, it’s a great time to recession-proof your finances by setting up a savings account and puting away a sum of money every week. If you are working from home, consider starting with the amount of money you are saving from not commuting, buying lunches out, paying for fuel, and all the other trimmings that go with it.
Think about the ways you can cut back
Think about ways that you can cut back. In all fairness, in the last few months, there hasn’t been much to cut back on, however, there is always room for improvement. Do you have a $20 a day coffee addiction? Maybe it’s time to invest in do-it-yourself coffee products so you can keep the quality coffee but lose the big price tag.
This same logic can be applied to all expensive habits. Consider cutting back by 15%, calculate how much you would save, and put that amount in a safe place for when you need it.
Talk to your friends and family about money
It might feel crass to talk to your loved ones about money, but having open, honest conversations about how much you manage to save and your relationship with spending can be illuminating.
As a society, we often feel uncomfortable talking about money, and are potentially competitive about how much money we have, so we often simply don’t bring it up. You might find a savvy friend has some good tips on how to better manage your money. Or, on the flip side, you might realise you are in fact really good with money, which might motivate you to further recession-proof your finances.
Focus on the future
A global pandemic and its accompanying recession might make you want to take every hour as it comes, and that’s fair enough, it is an unsettling time. But, focusing on the future will help keep you motivated on spending less and saving more.
It might not feel like it right now but there will be holidays to go on in the future, there will be concerts to attend, there will be parties and there will be full cinemas. There will also be mortgages and new cars and potential families to start. By focusing on what’s to come, you can help stay focused on where you currently are with your finances.
Marie Kondo the non-essentials
Most of us have some subscriptions lying around that we never use (unlike Crikey, of course, which is always good investment). It might be the gym membership you never use, a video streaming site you never watch, or even a monthly dinner with people you don’t like. One perk of an economic downturn is you can be pickier. Use this time to audit the non-essential. Quality over quantity, always.
Invest in yourself
Your greatest investment is yourself. Are there any skills that would help you further your career? Maybe you are where you want to be, but there are some things you could brush up on? Investing in a course not only gives you a project while we wait for life to return to normal, it also helps to refresh your CV and your mind.
If you are hoping to advance your career, move on to a new industry or show your current or future employers some initiative, now is a good time to consider developing and honing new skills. It may even lead you to the pay rise you have been looking for.
Look to the future but enjoy the present
There’s been lots of talk of battening down the hatches, and it’s good advice if I do say so myself, but another important and trendy habit is mindfulness. Treating yourself to things, whether its a new cardigan or a car is nice, but taking stock of everything you have and being happy with your lot is a priceless skill.
If you really want the coffee, get the coffee, but think about the motivation behind your purchases — and consider the ways you can be kind to yourself without being harsh on your wallet.