If you’ve been paying attention to the news or to top investors like Michael Burry, then you might be worried about an upcoming recession. And with good reason!
We are at a stage where the federal reserve is raising interest rates, layoffs are rampant, and the yield curve is inverted (which indicates a recession will happen in the next quarter).
What is a recession in the first place?
During a recession, various negative impacts can be seen on individuals, businesses, and the economy as a whole.
Job losses may occur as businesses reduce their workforce or go out of business, causing financial stress for those who lose their jobs.
Some companies may reduce their employees’ wages to cut costs during a recession, leading to lower disposable income and decreased consumer spending.
Businesses may also experience a decline in revenue as consumer spending decreases during a recession, potentially leading to bankruptcy or downsizing.
To meet expenses during a recession, individuals and businesses may be forced to take on additional debt, which can be difficult to repay in the long term. Investors may become more risk-averse during a recession and reduce investment in stocks, bonds, and real estate, leading to a decline in the overall value of these assets.
The housing market may also decline during a recession as people lose their jobs and face financial difficulties.
How You can save money in a recession
It is especially important to take measures to save money and prepare for stormy weather. Here are some tips to help you save money even during a recession:
Create a budget
Create a budget and stick to it. Assess your income and expenses and determine where you can cut back. Try to reduce expenses on non-essential items, such as eating out and entertainment.
Shop smart
Compare prices before you buy anything. Look for deals and discounts, and buy in bulk when possible. Try to buy generic or store-brand products instead of more expensive name-brand items.
Reduce debt
High levels of debt can be a major hindrance to saving money. Consider paying off high-interest debt, such as credit card debt, as soon as possible.
Reduce energy costs
Look for ways to reduce your energy bills. Install energy-efficient light bulbs, turn off lights and appliances when not in use, and consider using a programmable thermostat.
Use cash instead of credit
Using cash instead of credit can help you stay within your budget and reduce the temptation to overspend.
Save for emergencies
During a recession, it is even more important to have an emergency fund. Aim to have at least three to six months of living expenses saved in case of unexpected expenses.
Invest in yourself
A recession is a great time to invest in yourself and your skills. Consider taking online courses or learning a new skill that can help you advance in your career.
A recession might just be the best time to bet on yourself and launch a side hustle. For inspiration, check out our posts about some of the people who have been able to entirely quit their 9 to 5 by starting a side hustle!
By following these tips, you can save money even in a recession. Remember to be mindful of your spending and focus on building up your emergency fund. By taking control of your finances, you can weather any economic storm and come out ahead.
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