Very Important! How to Save Money During This Biting Recession

 

As recession bites harder,  and many households resort to shoestring budget to survive, there is no gainsaying the fact that savings may be the first casualty of the current economic downturn.

 

However, experts have reasoned that having a healthy emergency fund, learning how to adapt to a more frugal lifestyle, and diversifying your sources of revenue are just a few money saving tips that can help one survive this recession. “A recession is something beyond our control, but what we can control is how we prepare for tough financial times. Taking precautionary measures now to safeguard your finances in the future can make a world of difference. When you know how to recession-proof yourself and your finances, a downturn in the economy is no longer anything to fear. Instead, you can live peacefully knowing that while you can’t control the world, your finances are under control and you’re ready for whatever comes your way”, says MyMoneyCoach, a free public service provided by the Credit Counselling Society (CCS),

 

CCS has, however, rolled out some tips on how to ‘recession-proof your finances.’ Here are some of them:

 

 

When the economy starts to dip, our jobs and our income can be put in jeopardy, and it’s for this reason that saving an emergency fund is crucial when you prepare for a recession. In a nutshell, an emergency fund is the money you’ve saved up for the sole purpose of helping you get through your day-to-day living during financial hardships.

 

Whether your hours have been cut back, you’ve lost your job, your business isn’t making any money, or you made some poor financial decisions, emergency savings will give you a safety net to fall back on so you can ride the wave and emerge from the recession back on your feet.

 

If it’s possible, try to save about three to six months’ worth of your wages, so when the economy is down and money is tight, you won’t have to turn to credit. Using credit as a safety net is a mistake that often haunts people for years after the fact. Most don’t foresee the reality that they will need a larger income than they currently have to both repay the money (plus interest) that they borrowed during the rough patch.

 

Tough times always last longer than you would think, so debts from these times are always greater than anticipated. Since most people are used to living on their entire salary, they don’t have anything extra to repay this debt. So, they have to either increase their income or significantly downsize their lifestyle to afford repaying the debt at their current income level.

 

If you haven’t already started saving, here are some steps you can take to save money in an emergency fund. Chances are, you won’t be saving money in a recession because you’ll have other matters to look after, so it’s best to start saving before a financial downturn hits.

 

 

Carrying a debt burden is exactly that: a burden. And, during a recession, when jobs are scarce and money is tight, those high debt payments will add only more stress to an already stressful situation. So it’s time to take stock of your financial situation and all your payment obligations, and to make a plan to pay down your debts.

 

During a recession it can be difficult to cover day-to-day expenses – let alone debt repayments – and this can cause your debt to spiral out of control. Carrying high levels of debt is very risky, because a slight change in external factors could affect your ability to pay your debt. Although you may be able to manage payments now, a job loss or an interest rate hike combined with banks tightening credit limits could change that for the worse.

 

The first step to successfully paying down your debts is establishing a budget that accurately reflects the money coming into your household, and where that money is supposed to go. If you aren’t tackling your debt as aggressively as you could – or worse, adding to your debt – having a budget will help you identify spending areas you can cut back on so more of your money can go towards paying down your debt. Here are some detailed steps you can take to build a household budget, so you’ll be able to live within your means and manage your money better.

 

 

Downsizing and learning how to live frugally can be a great strategy, because if you can learn to make do with less, you’ll increase your savings and you won’t find yourself struggling to adapt to a new lifestyle when a recession hits.

 

Living frugally isn’t as difficult as it sounds, and contrary to popular opinion, a frugal lifestyle isn’t about pinching pennies and depriving yourself of things that bring you joy. Rather, it’s about making conscious spending choices that reduces expenses, with minimal impact on your lifestyle.

 

There are lots of ways you can start living frugally. If your family has two vehicles, consider reducing it to one and making use of public transit. This choice alone could save you much money per year. Or, if having two cars is necessary, consider selling one of the cars for a more fuel efficient sub-compact vehicle to save on the cost of petrol. You can also look into downsizing your home or apartment, and scaling back on your mobile phone plan.

 

The key is to ensure the cuts you’re making aren’t too extreme, or it will be difficult to sustain in the future. Learning how to get by with less is the key to recession proof living.

 

 

Most of us are familiar with the saying “don’t put all your eggs in one basket,” and this adage could be applied to your source of income. Relying solely on a particular job for all your income has inherent risk. if the economy tanks and you lose your job, you’ll also lose your only income and your ability to meet all your financial obligations.

 

Having multiple streams of income can really help. If one income source starts to dwindle – or gets eliminated completely – you have other sources to fall back on to help keep you afloat. Diversifying your income doesn’t necessarily entail getting a second job – in fact if your spouse is working in a different industry than you, you have some income diversity right there. However, if you’d like to stretch your wings and bring in some more income you can look into many different options such as renting out a room in your home, renting out a space in your garage, or going so far as to buy a revenue property and rent it out.

 

If you have a fairly flexible schedule, you can consider getting a weekend job, and if you have particularly strong skillset or are developing one, you can look for ways to cash in on those skills. For example, if you’re a strong writer you can look into freelancing articles and blog posts. Any skill or talent your have could potentially be turned into a way to earn extra income.

 

 

In addition to diversifying your income, it’s also important to diversify your investments. If you have most of your money tied up in stock market investments, an economic downturn could be a financial disaster if all your money is tied up in one type of investment. And it’s for this reason that diversifying your investments is key.

 

Go through your investment portfolio and make sure your investments are spread out across different industries and even different types of assets so that when the market tumbles, your investments won’t be as affected and your losses won’t be as deep.

 

When it comes to diversification, you can park your money in a number of different investment vehicles. Real estate – whether it’s buying a home, a condo, or even land—is a common investment that generally appreciates with time. Investing in stocks – especially the stock market index – is a good way to help your portfolio grow, while bonds have often been a good way of bring in income. You can also consider international investments, as diversifying into other countries can also help to reduce your vulnerability to an economic downturn.

 

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Via The Sun