Recession. We’re starting to hear that word make the media rounds as experts predict another economic downturn in our future. After a year of inflation, rising interest rates and continued unease about the future, it can be daunting to think about another recession. Instead of getting caught in a fear spiral, let’s turn to preparation. Here are three ways you can recession-proof your finances and be mentally and financially prepared for whatever may come.
1. Make a Plan to Tackle High-Interest Debt
- With rising interest rates, debt becomes even more of a budget buster and can become a serious source of financial stress in a recession. Make a plan now to start paying down high interest debt. The first step is to make a list of all your debts with balances and interest rates. For example:
- Next, explore your payment options. The debt avalanche can be an effective self-managed method of tackling high interest debt. If you want more support and to look at lowering your interest rates while you repay, a debt management plan could be a great option for you. A credit counselor at Apprisen can help you review all your options and select the one that makes the most sense for your unique situation.
2. Build an Emergency Savings Fund
- In tough economic times, an emergency savings fund can provide mental peace and financial stability. It’s fine to start small here but commit to putting some money into savings every paycheck. If you get a bonus or raise, stash some of that in your emergency savings. It’s imperative to have some liquid savings on hand to ensure you can ride the economic waves.
3. Diversify Your Income
- Job loss is always a concern during a recession. To really recession-proof your finances, consider diversifying your income. There are so many ways now to create a side stream of income including driving for a delivery service (groceries, takeout, etc), Airbnb’ing an extra bedroom, or sharing your skills via Taskrabbit. Creating multiple streams of income now can help you weather the storm of a temporary job loss during a recession and help you with the first two steps, paying down high interest debt or building an emergency fund.
As you look toward the future, don’t let fear or anxiety be your guide. Make a plan to recession-proof your finances with an eye on achieving mental and financial peace. Remember this month’s mantra: “I won’t let my recession fears sabotage my long-term financial growth”. If you want to chat with someone to help create a plan or explore your debt repayment options, we’ve got you! Start the process through our convenient online service, IRIS, and connect with a financial expert.