Could Your Finances Handle another Recession?
While it might be a little premature to say that we are headed for another recession, the fact of the matter is that economy has been slow to recover, and that is affecting a number of people — even though the experts say that we have been out of a recession for a couple of years now. The concern is that the current stagnation could easily revert to a recession in the coming months. And you need to be prepared for that possibility.
Indeed, it is is always a good idea to be prepared for the possibility of economic upheaval and recession. The best way to prepare is by getting your finances in order. Usually, that means going back to the basics and doing what seems fairly obvious — but for some reason doesn’t always happen in your finances:
- Get your spending under control: Many people began cutting their spending during the recession, and in its aftermath. However, spending has been creeping up a bit as people begin to feel a little more comfortable with the current state of things. Now is the time to reduce your spending, and look for the best deals. If your spending has been increasing lately, take a step back and consider getting back under control.
- Reduce your debt: How has your debt reduction plan been going? Have you been flagging in your efforts? If so, now is the time to boost your efforts. Improve your debt pay down attempts. You can improve your credit at the same time you build a better financial footing. Whatever you can do to get yourself in a more secure financial position will be of benefit in a recession.
- Prepare for the future: In addition to reducing your spending and your debt, it is a good idea to prepare for the future. Are you contributing to a retirement account? Do you have an emergency fund? You can even build an emergency food supply. All of these things will help you if a recession comes and puts your finances at risk. Consider your future, and prepare for the setbacks. If you aren’t ready, a single setback during a recession (or any other time) can be devastating.
Miranda, The future is always uncertain so you are wise to caution against abandon. It's always a good idea to hold back a bit on the spending and to save :).
I'm likely better prepared than most. The foremost reason is because I live in Manitoba, Canada, which has weathered (and will almost assuredly continue to weather) the current financial situation better than most. I am also employed in a recession-resistant job (teaching) and I have very very simple tastes that allow me to currently have a great savings rate.
Hm, I think that reducing spending out of fear of a potential recession is a bad idea. (Reducing it because you've been spending too much or want to get a handle on your finances is a different story.) I do think that reducing debt and preparing for the future by building savings and an emergency fund are good ideas.
Reducing your debt also includes shaving years off your mortgage as it is your biggest debt.
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