Worried About a Recession? 5 Things You Can Do Today

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  • Recessions are a normal part of the economic cycle. They can also be painful for the average consumer.
  • Today, reworking your household budget is a good first step.
  • Now is the time to consider alternative streams of income that will help get you through the tough times. 

Recessions come and go. The best you can do is prepare to ride them out.

Look, we've had a wild couple of years. It's safe to say that few of us emerged unscathed. In addition to concern over a global pandemic, we've had inflation to contend with and a beating drum of analysts saying a recession is nigh.

Whether analysts correctly predict a recession does not matter. What matters is that you know you've done everything possible to prepare. That way, when another recession arrives, you'll be ready.

1. Rework your household budget

Few of us like the word "budget." Still, your household budget acts as financial GPS, reminding you of which direction you should go and when you've gotten off the beaten path. If you don't have a budget, it's easy to build one that works for you. If you have a budget, take another look at it.

What can you cut? Even if we're years away from the next recession, it's to your advantage to cut expenses. The less you waste, the more you save. Here are a few things you can check out today:

  • Auto and homeowners insurance: Don't assume the company you've been with for years still offers the lowest rates. Call around and get a few quotes. Not to sound like a commercial here, but you could save hundreds a year.
  • Lawn service: If you're paying for a full menu of lawn care services, decide if there are a few you can take over yourself. For example, you may still want someone to mow, but can take care of fertilizing on your own.
  • Groceries: There are apps available that will help you identify which nearby stores have the best prices on the items you need. Even if you save just $25 a week, that's $1,300 a year. 

2. Focus on high-interest debt

High-interest debt (like credit cards) and hideously high-interest debt (like payday loans with APRs over 400%) are the enemy when it comes time to hunker down and protect your money. This debt snowball calculator will help you figure out how quickly you can erase high-interest debts by putting a little extra toward them each month.

3. Fortify your emergency fund

With everything else you have to do, it may seem impossible to build up an emergency fund. Although we're not suggesting you do it overnight, look at how much you have left over after you pay your bills every month. Let's say it's $200. Is there any way you can dedicate at least $100 to your emergency savings account? 

The idea is to have enough put away to cover your monthly bills if you lose your job, become ill, or otherwise cannot work. 

If you're not sure how much you should have in an emergency fund, this calculator can help. And if you find yourself ultra-anxious about what a recession would mean to you, it's okay to plump that emergency fund up a little more. If you never have to dip into it, it's a win-win.

4. Examine alternative streams of income

Honestly, few of us have time for an extra job. But what if you could spend time doing something you enjoy and get paid for it. For example, if you play the guitar, there are plenty of people who would like to take lessons. If you paint, you're likely to find a gaggle of people who want to learn how to turn a blank canvas into a work of art. 

The point is: Everyone has a skill of some sort, whether it's playing chess or baking cupcakes. Look for a way to monetize something you enjoy doing. 

5. Get help if needed

If you find yourself deeply in debt, your credit is shot, and you're not sure how to rebuild, there are organizations out there designed to help you get back on your financial feet. For example, the National Foundation for Credit Counseling (NFCC) is a nonprofit organization that matches you up with a NFCC certified counselor who will help you create a plan to tackle your existing debt. 

You cannot control when the next recession will hit or how long it will last. You can, however, make arrangements now to protect your assets when a recession does roll around.

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