5 Simple Ways to Prepare Your Personal Finances for a Recession

A recession can be a scary time financially—but it doesn’t have to be if you prepare well ahead of time.

The economy in the U.S. is crumbling, and many are predicting a recession that could be on par with the Great Depression or worse. Around the world, inflation is soaring, and we can all feel the ground shifting—and with it, so are our finances and investments. Many people are anxious about inflation and sweating over making the right decisions to ensure their financial security when the economy gets sour. If you are looking to prepare well before the storm hits, here are a few tips that will help you figure your finances out. 

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By Samiksha Jain – Read this article in its entirety HERE on JumpStart’s website

1. Create (or update) your budget plan

The first step to taking control of your finances is creating a budget. If you don’t already have one, now is the time to sit down and figure out where your money is going. Start by tracking your income and expenses for at least one month to get an accurate picture of your spending. Once you understand your cash flow, you can start making changes to fit everything into your budget. For example, if you’re spending more than you’d like on eating out, you can adjust accordingly by, for instance, cutting other expenses.

2. Cut unnecessary expenses and save, save, save!

Cutting unnecessary expenses will help increase your cash flow and reduce your overall financial stress during a recession or down market period. You can do so by reducing spending money on luxury items and unnecessary purchases, such as big houses, expensive cars and big-screen TVs. When shopping for groceries, buy in bulk wherever feasible to save money, especially when you have limited income to pay your bills or are trying to save up more.

As per U.S. Senator Elizabeth Warren’s book All Your Worth: The Ultimate Lifetime Money Plan, try to spend around 50% of what you earn each month on necessities, 30% on wants and 20% on savings—also known as the 50/30/20 rule of thumb. Although savings rates remain modest, they are gradually increasing. By saving in an online bank account, you may earn between 1.75% to 2% annual interest or more, which is higher than the average rate from a traditional bank. This may appear a difficult chore, but even small monthly savings may pile up over time.

3. Keep an emergency fund

It’s always a good idea to have some emergency funds on hand, but it’s even more critical…

Read on…article continues HERE on JumpStart’s website