Managing your money in today’s ever-changing economy can be difficult, especially if you don’t have a plan or don’t know where to start. Fortunately, there are steps you can take to help recession-proof your finances and keep you on the road of financial stability, no matter where the economy goes.
Build an Emergency Fund
According to a study by the Federal Reserve, 36 percent of Americans would not be able to cover a $400 emergency expense. Without an emergency fund to help, these unexpected costs could snowball into a potential financial hardship with long-term negative consequences.
Building an emergency fund starts with knowing your monthly income and expenses. Ideally, the goal is to save enough to cover expenses for six months, or at a minimum, three months. The easiest way to start is to set up direct deposit to your emergency fund account so money is automatically saved each payday. Travis Credit Union has Money Market Accounts and other savings products that help you to keep your emergency fund growing, with full access if you need it.
Reduce Debt
Next, identify ways to reduce your debt, prioritizing balances that are at high interest rates. Lowering your debt is important because creditors review your debt-to-income ratio when you apply for an auto, home or other loan. The higher your debt, the higher your risk is to the lender, who may give you a higher interest rate to cover that risk. If you have high interest rates on a credit card or auto loan, consider moving that balance to a lower-rate loan. This saves you money on interest and lowers your payment as well. If you have several outstanding balances, consider a debt consolidation loan that combines those balances into a single loan with one monthly payment. To see how much you can save, use TCU’s free debt consolidation calculator.
Cut Back on Unnecessary Expenses
Along with lowering your debt, take an honest look at your budget to see where you can lower expenses. For example, how often do you use the digital streaming services that you pay for each month? If it’s just for a few hours, are you getting your money’s worth?
Another way to cut back is to review your cable, cellular, car insurance and other household services that are frequently longstanding contracts. Contact each provider and ask about ways to lower your bill. Chances are they can offer options to help.
When shopping, consider visiting thrift stores for clothing and household items instead of department stores. And when it comes to medicine, try purchasing the generic version instead of the brand product, especially if the active ingredients are the same. All these changes can help save you money.
Diversify Your Income
Another way to recession-proof your finances is to diversify your income. Many people have one full-time job that pays all the bills, but what happens if your work suddenly closes or if there’s a disruption in operations? Having various sources of revenue can help keep your finances afloat if one income stream stops, even if it can’t pay all of the bills. Some examples include part-time jobs, like becoming a ride-share driver, working for app-based food delivery and freelancing online services.
Those with the resources might want to consider establishing passive income streams, which is revenue generated with minimum effort once it is set up. Examples of these include property rental, investing in the stock market, or opening high-yield deposit accounts like Certificates.
Choose Assets that Hold Their Value
If you’re focused on investing, select assets that can withstand economic challenges such as a recession. As mentioned earlier, real estate is a top choice because it tends to hold its value over time and could potentially pay for upkeep and mortgage costs by renting it out.
Precious metals such as gold can hold value over time as well. Gold has been a good long-term investment because of its limited supply. You can buy gold directly via the American Precious Metals Exchange (APMEX) and other dealers. You can also invest in a gold-related mutual funds or stocks.
Another asset to invest in is a certificate, such as those offered by Travis Credit Union. These savings products let you earn a set yield for the term of the certificate, so you’ll know exactly how much you’re getting for your money. Plus, at TCU deposit accounts are federally insured up to $250,000 by the National Credit Union Administration.
Stay Informed and Adaptable
Of course, the best laid financial plans can go astray, so be open to change. Stay current with economic news and trends so you can spot opportunities and avoid missteps. While there’s no way to know for certain how the economy will perform in the future, you’ll have more peace of mind by being prepared and proactive in your financial planning.
Travis Credit Union Can Help
Credit unions were created to help people, in good and bad times. Travis Credit Union is no exception, and we’re focused on your financial wellness. We have a wealth of information and services to help. See where you stand with our free Financial Health Assessment as well with information on how you can plan, save, spend and borrow better.
TCU offers free on-demand Webinars on a variety of financial topics. View our Financial Wellness Blog for money-related topics. To learn more about how we can help you, visit traviscu.org.