How Do You Prepare Your Finances for the Economic Downturn?
For several months we have been talking about our inverted economy and what that might mean for your finances if we experience a recession. While the apparent onset of a recession is not a surface concern, the Great Recession continues to weigh on many of us.
Maybe you lost your job back then or couldn’t get one after graduating from high school or college. You may have fallen behind on a mortgage, lost your home to foreclosures, or had to postpone trying to sell your home because the market was so bad. You may have had to make another difficult choice to get by without what you are still dealing with today. That is why it is so scary to think about what is happening in the economy.
Several signs indicate that if we are not already in a recession, we will be in the near future. Here at Lifehacker, we recommend that you exercise caution, not panic. It’s time to choose financial adjustments that can make your money less prone to the impact of the recession on your lifestyle or livelihood.
Among the steps you can take right now , debt repayment ranks high. Paying off your debt will leave you with fewer or fewer bills if you have to cut your expenses; and if you create your own emergency fund, you reduce the likelihood that you will have to turn to these lines of credit as a last resort. You can also transfer part of your pension contribution to the Roth IRA to use as a backup for your emergency fund.
And of course, it can help you rethink important financial decisions like buying a home or getting a big car loan. We’re not talking about cutting costs entirely – remember, don’t panic – but cautious optimism is always a healthy choice for your money.
But we also heard from many of you in the comments on our economy posts. Some of you are cutting your spending a lot to prepare for the worst-case scenario.
Tell us: What are you doing to prepare your finances for a downturn? Are you making small changes to big ones? Are you cautiously optimistic or expecting the worst?