Stick to the Budget
If you aren’t budgeting or if you’re not sticking to the budget, it’s time to double up on those efforts. Creating a household budget ensures that all needs are met and planned for within the income parameters. Budget busting activities that may need to be reduced or cut include going out to eat, luxurious vacations, monthly subscriptions, and even costly phone or computer apps.
Allocate a small percentage of your income (5-10%) toward reserves. These reserves should be allocated for short term as well as long term interest earnings investments. In this regard money market funds will be an ideal investment option, which is a diversified fixed income investment portfolio that focus on earning interest while preserving capital and remaining liquid. Further it allows you to make monthly contributions and build a corpus over a long term period whilst enjoying an attractive interest. This reserve should be separate from your regular bills and living expenses.
Ensure savings and investing a percentage of your income (even if it’s just a small amount) is a priority at the top of your budget. Any savings you reap from budget cuts or any additional income you earn from side-hustles, raises, or promotions should be funneled directly into cash reserves in preparation for the unknown.
Stop the Bleeding
Put a stop to any budget “leaks” such as interest and fees by strategizing to pay off debt, exploring balance transfer or consolidation options, and ensuring all payments are made on time. Create a cash flow plan so you can visually see your day-to-day bank balance as compared to when your bills are due so that you don’t miss any payments and so that you can identify which bills have the highest, most difficult to make minimum payment requirements.
Build your Resume
Even if you don’t plan on switching jobs, prepare yourself personally and professionally to be marketable. Freshen up existing skillsets, document ways you add value to the company in your current position, and find evidence as to how you help the business cut costs or add to revenue. Explore opportunities to take on initiatives, participate heavily in projects, and establish yourself as an expert in the company or department. Using this information, you can build a case for a raise or promotion, or, if it comes to it, look for a new job.
Revisit your Goals
The most important thing not to do in a slow economy is to sell investments and pull your money out of the market. Doing so would solidify any losses and block any potential gains that could occur when the market springs forward. To temper your reaction to a downward trend, take a second look at why you’re investing, what you’re investing in, and what your investment goals are. Just as you should consider rebalancing during a market high, you may consider it during this time to ensure proper diversification of your portfolio.
It’s helpful to gain the perspective that when markets are slow, funds’ prices are reduced and that it’s likely the best time to increase investment contributions. Just as you prefer to buy clothing when it’s on sale or at clearance pricing, you should prefer to invest when the market is experiencing a dip. If you’ve prepared your personal finances so that you have a hefty emergency fund, a well-working budget, and little-to-no debt, there’s a chance that a recession is a great opportunity for you.
Slow economies are unpredictable, although typically short-lived, but can have a long-lasting hindrance on families’ financial statuses because of the tell-tale features that include unemployment, reduced disposable income, and a steep decline in consumer spending and investing. Instead of just worrying about the potential harm a recession could cause to your financial life, take action on the above money moves. Rest assured if you’ve spent time properly preparing your budget, savings, and investing perspective, building savings in a slow economy will be a cinch!