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Preparing for Tough Times: 7 Steps to Build Your Financial Resilience

Preparing for Tough Times: 7 Steps to Build Your Financial Resilience

Here we go again; the signs of a recession are all present.

As a seasoned person, I know economic recessions can have significant impacts on our financial stability and wellbeing. I've been through a few recessions myself. I would even argue that this could possibly be the beginning of a depression. I've personally lost everything during the recession of 2008/2009. I recommend taking several steps to prepare for a recession to ensure that you can weather any potential financial storms. It's always easier to prepare for bad times and not need it than to be scrambling to figure things out in a panic as your life rapidly implodes. These things are good to do even if you are not preparing for a recession. They can become immensely helpful in the event of a medical crisis, a death in the family, or any other random sudden hardship.

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STEP 1

Build an emergency fund: Start saving money now to create an emergency fund that can cover your living expenses for at least 3 to 6 months. This fund should be easily accessible and separate from your regular savings or investments. In case of a job loss or financial hardship, having an emergency fund can help you stay afloat until you're able to get back on your feet. Start on payday by paying yourself first, put that money into the bank and continue to grow that account until you have six months of savings. Do this for as long as it takes to build yourself a nest egg. You will be so relieved if something should happen that you have done this.

STEP 2

Reduce your debt: In a recession, high-interest debt can become difficult to manage. Prioritize paying off your debts and avoid taking on new ones. If you have multiple debts, consider using a debt snowball or avalanche method to pay them off more efficiently. Pay off the debts with the highest interest rate first. After you have paid off the highest rate debt, then put what you were putting on that debt towards the second-highest. Keep increasing the amount you are paying off as you build the snowball of payments to your principal on your debts. By reducing your debt, you'll be able to better manage your finances and avoid the stress of mounting interest payments. In times of recession or depression, banks will begin to reduce the amounts people can borrow. Put yourself in a position where you do not need to be borrowing money every month at all.

STEP 3

Cut unnecessary expenses: It's crucial to reduce your expenses during a recession, as income may be reduced or uncertain. You can start by creating a budget and cutting out non-essential items such as subscriptions, dining out, or luxury purchases. Go over your budget every month to see if further cuts can be made. Also, consider ways to save on utilities and other bills, such as turning off lights when not in use or shopping around for a better insurance deal. Try buying in bulk so you can get more savings. Only purchase pantry items you can and will eat during a crisis. Learn to entertain yourself and your family with free things, go to parks, beaches, hiking. Do things that do not require you to spend any money. Pack picnic lunches and stick to your budget. Be sure to discuss all the changes with your family so that everyone is on the same page and also helping to cut expenses.

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STEP 4

Diversify your income: During a recession, having multiple income streams can provide a buffer in case of job loss or financial hardship. You can explore part-time jobs, freelancing, or other side hustles that align with your skills and interests. Good places to pick up extra work are Fiverr or Upwork. You could also consider monetizing a hobby or renting out unused space in your home. Even taking in a roommate can drastically help with your expenses. This may be a good time to start a second job or side hustle.

STEP 5

Invest in yourself: Developing new skills or certifications can make you more marketable in your field or in other industries. Consider investing in courses or workshops that can expand your skillset or enhance your resume. You can also attend networking events to connect with like-minded professionals and explore new opportunities. Consider taking on a trade skill. Look into federally funded trade schools and programs. Ask your current employer if they would help cover continuing education for you. Some companies will pay for your tuition or advanced classes to help you grow and be more valuable for your employer.

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STEP 6

Build a support network: Staying connected with friends and family can help you maintain a positive mindset and find support during challenging times. Consider joining a support group or seeking out counseling services if needed. Also, having a financial advisor or mentor can provide valuable guidance and insight into managing your finances during a recession. If you have a place of worship or a community that you are part of, be sure to stay in touch with them. Communicate your needs and don't be afraid to ask for help. Avoid isolating yourself.

STEP 7

Stay informed: Keeping up-to-date on economic trends and news can help you make informed decisions about your finances. You can follow financial blogs, read relevant news articles, or listen to podcasts that cover topics related to personal finance and investing. Having a solid understanding of the current economic landscape can help you plan ahead and make strategic decisions about your finances. Be sure to check multiple sources for the information that guides you in your decisions. Be sure to check what experience and knowledge the people who are guiding you have.

Overall, preparing for a recession is a long-term process that requires patience, discipline, and a willingness to adapt. By taking proactive steps to build your financial stability and resilience, you can be better prepared to weather any economic downturns that may occur in the future. I can't stress enough how important it is to prepare for hard times. If you prepare for hard times and they don't come, be happy you were prepared and are able to withstand a recession/depression.

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