What should you do to survive a recession?

Surviving a recession can sound like a daunting task, as there are several unknowns lurking on the horizon during a period of economic turmoil. Is your job secure?

How long are your savings going to last? These questions are difficult to answer, especially if you are unprepared for the many variables presented by a recession. Establishing your financial security early on can alleviate some of these pressing questions and prepare you for any possible outcome.

To survive a recession, it is important to learn how to protect your income. This protection is easier to manage when you reduce your spending and maximize your savings. The more money you have put away leading up to a recession, the less you are going to struggle if an event like this takes place. You do not want to be seeking additional employment in the middle of a recession as a way of making ends meet.

Learn How to Protect Your Income

When a recession hits, it puts your income in danger. Whether you are laid off, furloughed or your hours are scaled back, the paycheck you receive each week is more likely to fluctuate when the economy is struggling. To reduce the amount of damage this inflicts on your household, you need to learn how to protect your income in advance.

The best way to accomplish this is to find new ways of protecting your job if lay-offs appear imminent. This includes working extra hours, or improving upon your current skillset to make yourself invaluable to your employer. When your boss or manager sees your commitment to getting the job done correctly, he or she is more likely to see you as indispensable.

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If you are laid off because of a recession, it is important to update your resume and enter the job search immediately. While it is hard to find a job when the unemployment rate rises, you need to be prepared for any opportunities when you find them. This may even mean searching for openings outside of your field if you are struggling to find positions like the one you recently lost. However unrelated to your career it may seem, anything is better than struggling through the recession without receiving a paycheck each week.

Minimize Your Spending

Whether you are laid off or not, it is crucial to minimize your spending during a recession. Depending on your lifestyle, there may be several areas where you can cut down your expenses. This is achievable through various avenues, and you can opt for the solutions that work best for you and your family.

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While it may be difficult, it is important to examine your spending habits and identify areas where you can cut back as a family. A few easy ways to reduce your spending include the following:

  • Refinance your credit card debt if you are paying a high interest rate on your existing balance. Many credit card companies allow you to transfer your balance from one account to another, and this alleviates some of the pressure associated with paying a high interest rate each month. Look for credit cards offering a zero percent annual percentage rate (APR) to start. Transferring your balance is accompanied by a small fee so you must account for this in your budget before you complete the transaction. This fee can be anywhere from $75 to $, though many companies only charge three percent of the amount you are transferring.
  • Switch internet plans, or eliminate monthly fees for streaming services until your income is restored. Oftentimes, internet providers offer a variety of plans at different price points, and you can easily switch from one plan to another to cut down on your spending. In addition, if you currently pay for three streaming services, choose one service you like best and stick with this account until you can pay for all three later.
  • Use money saving apps or a cash back credit card to receive a small amount of money back for each essential purchase you make. For instance, use your cash back card to pay for groceries, and then utilize one of the money-back apps that pays you a percentage for certain grocery items you buy. This allows you to double the return you receive on everyday purchases, which adds up over the course of the month.

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Maintain Your Savings

Once you realize the recession is starting, it is helpful to find new ways of replenishing your savings account. This may include increasing the amount you deposit into your account each month, or it may entail opening a separate emergency fund to ensure you have money set aside if you lose your job.

Credit cards are not meant to get you through an extended period of unemployment, as the debt you accumulate during this time can take years to pay off in full. This puts you at a disadvantage once the recession is over, and you may be left with more debt than you had when you lost your position initially.

It is easier to maintain a savings account or an emergency fund if you are in a partnership with someone who is working full-time as well, though this is not an option for everyone. Regardless of whether you have someone assisting in your financial situation, it is important to find ways to maintain your savings when heading into a recession.

For example, choose to add an extra $10 to your account per week, or take a portion of your paycheck at the end of the month and transfer it into an emergency fund. By creating an emergency fund, you are providing yourself with two sources of money you can dip into if you lose your stable income.

Applying for a second job helps to maintain your savings as well, as you can put the paycheck earned from a side hustle directly into your savings or emergency fund. This allows you to use your primary source of income for the purchases you need to make each month without having to worry about whether you are setting enough money aside for an emergency situation.

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