The Great Recession ended 9-years ago. Since then, we’ve been enjoying market returns and increased employment opportunities – but this good fortune can’t go on forever. In fact, many economists think a downturn is overdue. If they are right, will you be ready for a recession? Here are 7 financial moves that will protect you.
1. Top Up Your Emergency Fund
To protect yourself from any kind of financial misfortune, it’s a good idea to bulk up your emergency fund. According to the 2012 Bureau of Labor Statistics report, unemployment reached a rate of 10% in 2008 due to the recession. If a dip in the economic climate causes another recession, you’ll need to have enough cash on hand to weather the storm. Generally speaking, you should always have 6-months’ worth of income stashed away in your emergency fund to protect yourself from borrowing money.
2. Pay Off Consumer Debt
If you’ve got high-interest credit card debt, now is the time to pay it back. Having high-interest debt only makes you more reliant on your salary, which might disappear if a recession strikes. Use the current strong economic period to destroy your debts sooner rather than later – you’ll be glad you did.
3. Avoid New Debt
As well as paying down old debt, it makes sense not to take out any new loans. As tempting as credit cards are, use them as little as possible to prevent a debt spiral. Unless you plan on using a 0% balance transfer offer as part of your debt repayment strategy, shred every new credit card application that comes through your door.
4. Cut Down Your Fixed Expenses
When looking for areas in your budget to cut back on, most people focus on variable expenses like groceries and eating out. But, you shouldn’t forget fixed expenses, as they are often negotiable too. For example, if you drive an older car, you should consider cutting your insurance costs by switching to a liability-only plan. Additionally, you can try to negotiate a lower interest rate on your credit card balances. Or, why not cut your cable cord in favor of a cheap streaming service?
5. Learn New Skills
Knowledge is power. So, brushing up on your existing skills and learning new ones is a great way to make yourself indispensable at work. By learning practical skills like auto maintenance, carpentry, and gardening, you can save money on repairs to your home as well as equipping yourself to start a new side gig. To get ahead of a potential recession, pursue both of these ideas by solidifying your position at work and creating a new stream of income on the side.
6. Update Your Resume
If your job is your primary source of revenue, you’ll want to make sure your work life is on track too. It’s a good idea to update your resume so that you can take advantage of new opportunities before the economy takes a potential downturn. It’ll also make an unexpected job search easier if you happen to get laid-off suddenly. Check out 4 Ways to Handle Sudden Unemployment for more info.
7. Review Your Portfolio
If you haven’t already reviewed your 401k and IRA investments this year, now is a perfect time. If you are near retirement or want to lessen your risk level reassess your stock to bond ratio. While you are making a few changes to your accounts, why not figure out if you can up your monthly contributions, too? Perhaps you can use some cash you’ve saved from cutting back on expenses to grow your retirement fund.