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Recession; there’s that ugly word again that none of us wants to hear after going through 2008. But I think we can all pretty much agree that 2020 certainly isn’t shaping up to what we thought it was going to be! I don’t know that anyone could’ve predicted or prepared us for the economic impact of what we are currently experiencing globally. But I think it’s safe to say that we’re all going to be facing some pretty significant financial changes.
What Is a Recession, Anyway?
According to the National Bureau of Economic Research (NBER) a recession is defined as: “A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” Yup! Sounds like 2020 so far.
Some of the fallout that we typically see from a recession looks like this:
- Large numbers of people may lose their jobs, be laid off or furloughed
- Finding a new job can be a lot more difficult
- Employers may make substantial cutbacks on salaries, pay raises and promotions
- Investments may (temporarily) lose value
- Banks may tighten their guideline and criteria borrowing money
- Prices often increase on standard goods and services
- Savings accounts may earn less interest
None of this is really good news, and if your finances are rock-solid you may be well prepared for the circumstances listed above. Many people, not just in America, but around the world, were nowhere near prepared for what we’re experiencing now. So what can you do to shore up your finances and weather out a storm when the economy takes a down-turn?
Here are 9 Smart Money Tips for How to Survive a Recession
1. Review your budget and spending
If you’re not already following a budget, then this is a good time to give it a try. I promise it’s not painful, and can actually provide a lot of freedom and relief when you know exactly how much money you have coming in, where your money is going, how much you have to spend and how much you need allocate to exactly what. This can come in super handy when you need to figure out how to survive a recession as smoothly as possible.
If you’re new to budgeting, start with something super simple; make a list of your income, and a separate list all of your expenses. For expenses list them by the due date and the amount. This is just to help you get super clear on how much money is coming in, and where it’s going.
2. Cut what you can, and look for creative ways to save
Once you have at least an outline of a budget in place, go through and see which expenses are absolutely essential, which ones are nice to have and what things you could temporarily cut if push comes to shove. Take a look at what you’re spending now every month, and what your pattern has been over the last six months to a year if you have that information available. Realistically, what you could you cut without missing it? And where could you reduce your spending a bit? You may also want to allocate a bit more in other areas that are of higher value and greater importance to you.
3. Cancel under-used subscriptions
How many subscriptions do you have right now? And how much do you spend on subscriptions every month? Most of us have a ton without even thinking about it; things like apps we pay for, extra TV channels, Amazon prime, audiobooks, digital magazines, and more. Take a look at the things that are being charged to your credit card every month and consider if you actually need, want and love every single one of them. If the answer is a maybe or a no, consider getting rid of it, even just for now. The beauty with so many of our subscriptions today is that you’re not locked in for a full year – you can go month to month. Most of us can’t consume half of the content we subscribe to every month, so consider putting it on pause and being more judicious in what you’re using, how and when. You can always go back and restart your subscriptions once the economy is up and running again and income levels are back to normal.
4. Find new ways to make money
The reality is, the way you made money last year may not be the way you make money moving forward. Or your income may be significantly reduced. One of the best things you can do money-wise when figuring out how to survive a recession is to look for ways to boost your income.
Depending on where you are in your career, that could mean asking for a promotion or raise or moving to another company that offers better pay. Although this is probably not the best time to do either of those, every industry and every situation is different.
You could also consider getting a part-time job, starting a small business or looking for a side hustle to make some extra cash and even do it while staying at home. More and more over the last 5 to 10 years the world has moved towards a gig economy, meaning there’s a lot you can do on a per project basis as contract work. And yes, it really is from home. Need some ideas? Check out this post 10 Money-Making Side Hustles You Can Do From Home.
The possibilities are endless so get creative, put on your thinking cap and consider how you can make money, either online or off.
5. Renegotiate your bills so you pay less
You’ve heard the saying, “You don’t ask, you don’t get!” When it comes to negotiating your bills down, it’s important to remember that it never hurts to ask. The worst case scenario is that someone can say no – big deal. But the best-case scenario is that it could lead to big savings on an ongoing basis. Either way, you never know until you pick up the phone.
If you want to renegotiate your bills at a lower rate, it helps to know which ones might have a little wiggle room.
Bills worth negotiating are:
- Cable or satellite TV
- Internet service
- Medical bills
- Credit card interest rates and
- Car insurance premiums
Points to remember:
- Always be polite and speak in a friendly voice
- Speak to someone who has the authority and the ability to make the changes you’re looking for
- Have a couple of good reasons why they should reduce the bill for you i.e. time with the company, current promotions
- Know when to stop
6. Pay attention to interest rates
When looking at interest rates and thinking about how to survive a recession, there are two things to look at:
- The rates you’re earning on savings or investments
- The rates you’re paying on debt
In a recession, interest rates tend to go down. The Federal Reserve, which sets interest rate policy, can lower rates to try to encourage people to borrow money. We’ve seen that happening in the U.S. for a couple of years now. The upside of that is that if you want to make a large purchase, say buy a home for example, and you have the cash for the down payment, you could get a great deal on your mortgage rate.
The other advantage is if you’re trying to refinance the debt you already have, say student loans or credit card debt for example, and a decent credit score, if interest rates are low you could try to refinance those debts to get a better rate. And if you don’t know what your credit score is, the good news is that today most banks and credit card companies will list it right in the app. Log into yours now and check! And it’s always great to keep an eye on it week to week, and month-to-month.
7. Look over your investments
If you have some investments right now, that’s awesome! The challenge to surviving a recession with your portfolio intact is that stocks can be unpredictable. That doesn’t mean you should bail out of your investments just because you’re worried about the coming months, but you should know where your money is, what you own and if you need to make any adjustments or move things around. If your portfolio is diversified, chances are you were in good shape. But it’s still worth taking a look and reassessing if this is not something you do on a weekly basis. If you work with a financial advisor or financial planner, this would also be an excellent time to schedule a conversation and review with them.
8. Re-evaluate your financial goals for the next 3, 6 and 9 months
I love setting goals, and with most areas of life it’s crucial if you want to make measurable progress. This is especially true with money. But when a recession comes along, you may have to rethink your financial goals and priorities, both short term and long. At the moment for a lot of the world, both companies and individuals, there are two major financial concerns:
1. How to survive the short term and keep everyone paid
2. What to do in 6 months time in the new financial reality
Essentially, how to survive a recession financially is going to come down to how you prioritize your money.
When money is tight you may need to readjust those priorities with some of the tools and tips above. It might look something like this:
- Covering the basic needs, like food and clothing first
- Paying your essential household bills next
- Temporarily putting a hold on additional savings and investments
- Cutting out luxuries like trips, vacations, nonessential spending and meals out
If you can, try to pay at least the minimums on your debt each month – this one gets ugly fast if left unchecked
And be prepared with a backup plan just in case your money situation changes dramatically and you need to adjust your focus fast.
9. Load up on the cash-back apps
There are a lot of sites and apps that will pay you real cash to shop like you normally would. Full disclosure, I haven’t tried all of them and they may not make you rich, but they can sure help when funds are tight and times are tough!
Here are some of the top cash-back apps being used today:
Ibotta is a downloadable app that pays you cash back when you shop at 275 supported stores in the U.S. You check in before you shop, snap a photo of your receipt, upload it to the app and boom – get cashback! You can also link your store loyalty cards to earn cash back instantly when you shop.
Rakuten, formerly Ebates, allows you to earn cashback when you shop in-store or online. And when you download the Chrome browser extension, you can also get exclusive coupon codes to go along with your cash-back, to save even more money.
Honey is another free browser extension tool for Chrome, Firefox, and Safari. Honey scours the web for coupon codes and automatically applies them to your orders. They help you find the best price when you shop at places like Amazon, Bloomingdales, Sephora, Forever 21, Nike and more.
Dropis another cashback portal you can add as a browser extension to Chrome and /or download the app. Browse deals through the site, shop with your credit card and earn cash back. Super simple and an easy way to stack the cash back you earn with the rewards on your credit card.
Dosh is yet another app that makes it easy to earn cash back. You link a debit or credit card to the app, spend at partner stores and restaurants and get up to 10% back.
They’re all free to sign up and use, and you can try one or all of them to save money and get cash back wherever you can. It may not seem like much, but if I covers one utility bill a month, or maybe a mani pedi, that’s something!
Are You Recession-Proofing Your Finances?
Recessions, by nature, are not predictable. The best any of us can do is to ride it out being diligent and fully utilizing the resources at hand. Use the tips above to help you save money while still living well and we’ll all get through this together!
Are you doing anything differently with your money or do you have a tip for how to survive a recession?
Head to the comments and tell me about it, then pin and share this post if it helped you!