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How to Recession Proof Your Life

November 9, 2020

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How to Recession Proof Your Life

November 9, 2020

With the 2020 election now behind us, many Americans are now back to focusing on the economy and how the results may affect it. COVID-19 has hit unprecedented highs through November 2020 and are just expected to grow. With more Americans getting sick, no stimulus package on the way, and millions of Americans out of work, how can someone recession-proof their life?

Have an emergency fund

The importance of an emergency fund has never been more evident than when the world started shutting down due to COVID-19. It is absolutely essential that you have an emergency fund with liquid assets that you can use to survive for three to six months if you were to find yourself out of work. Having an emergency fund will allow you to regroup and focus on your next plans. As additional unemployment benefits have run stopped throughout every state, an emergency fund can be the difference between a bump in the road or a major financial setback.

Maintain good credit and pay off consumer debt

Consumer debt is rarely considered a positive aspect of your financial picture, but occasionally during a recession it’s necessary to use a credit card or loan to get you by. However, it can be increasingly difficult to open a new line of credit during a recession if lenders decide to raise their loan standards. Credit cards can be a useful tool in your financial arsenal if they are used wisely. Using your cards, collecting the points, and paying them off every month is a significant aspect of maintaining a good credit score, which in turn gives you lower interest rates, better odds at securing mortgages, car loans, and other large purchases. Another positive of keeping consumer debt low is that if a recession does hit and you have to empty your emergency fund, your credit cards will be able to help while you are out of work. Many credit card companies offer 0% APR for 12-24 months after opening a new card. Think of this as an interest-free loan that you can use to get back on track.

Optimize on the current ‘gig-economy’

It’s true that prior to COVID-19, America’s unemployment rate was low—however, ‘underemployment’ was at an all-time high. Basically, underemployment means that while someone may have a job, they are working one or more than one job to get by and often don’t have benefits like health insurance. Recent college grads often find themselves in this situation where they are working multiple hospitality or retail jobs to pay the bills.

It is possible to use this type of economy to your advantage. If you have an in-demand skillset, then try your hand at freelance or contract work. Due to the uncertainty of the economy, many companies are seeking out options to outsource their workers rather than keeping them in-house where they would have to pay for benefits. This can be used to your advantage. Start a portfolio and get connections before something major happens with the economy, that way if a recession hits, you’ll still be able to survive with your additional income.

Start protecting yourself from future recessions

The truth is, there are no guaranteed ways to recession-proof your life. Just in the last 12 years, America has experienced financial crises that weren’t seen since the Great Depression. Lessons to be learned from this are that recessions may always be right around the corner. Prior to COVID-19, the US economy was booming. No one could have foreseen a pandemic gripping the world and putting tens of millions of people out of work. It’s essential to have a health emergency fund, keep your credit score high and debt low, and try to find other means of income before a financial crisis hits.

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How To Recession Proof Your Life

How to Recession Proof Your Life

Economic uncertainty has been on the rise throughout 2020. Here's how to recession-proof your life and money.

With the 2020 election now behind us, many Americans are now back to focusing on the economy and how the results may affect it. COVID-19 has hit unprecedented highs through November 2020 and are just expected to grow. With more Americans getting sick, no stimulus package on the way, and millions of Americans out of work, how can someone recession-proof their life?

Have an emergency fund

The importance of an emergency fund has never been more evident than when the world started shutting down due to COVID-19. It is absolutely essential that you have an emergency fund with liquid assets that you can use to survive for three to six months if you were to find yourself out of work. Having an emergency fund will allow you to regroup and focus on your next plans. As additional unemployment benefits have run stopped throughout every state, an emergency fund can be the difference between a bump in the road or a major financial setback.

Maintain good credit and pay off consumer debt

Consumer debt is rarely considered a positive aspect of your financial picture, but occasionally during a recession it’s necessary to use a credit card or loan to get you by. However, it can be increasingly difficult to open a new line of credit during a recession if lenders decide to raise their loan standards. Credit cards can be a useful tool in your financial arsenal if they are used wisely. Using your cards, collecting the points, and paying them off every month is a significant aspect of maintaining a good credit score, which in turn gives you lower interest rates, better odds at securing mortgages, car loans, and other large purchases. Another positive of keeping consumer debt low is that if a recession does hit and you have to empty your emergency fund, your credit cards will be able to help while you are out of work. Many credit card companies offer 0% APR for 12-24 months after opening a new card. Think of this as an interest-free loan that you can use to get back on track.

Optimize on the current ‘gig-economy’

It’s true that prior to COVID-19, America’s unemployment rate was low—however, ‘underemployment’ was at an all-time high. Basically, underemployment means that while someone may have a job, they are working one or more than one job to get by and often don’t have benefits like health insurance. Recent college grads often find themselves in this situation where they are working multiple hospitality or retail jobs to pay the bills.

It is possible to use this type of economy to your advantage. If you have an in-demand skillset, then try your hand at freelance or contract work. Due to the uncertainty of the economy, many companies are seeking out options to outsource their workers rather than keeping them in-house where they would have to pay for benefits. This can be used to your advantage. Start a portfolio and get connections before something major happens with the economy, that way if a recession hits, you’ll still be able to survive with your additional income.

Start protecting yourself from future recessions

The truth is, there are no guaranteed ways to recession-proof your life. Just in the last 12 years, America has experienced financial crises that weren’t seen since the Great Depression. Lessons to be learned from this are that recessions may always be right around the corner. Prior to COVID-19, the US economy was booming. No one could have foreseen a pandemic gripping the world and putting tens of millions of people out of work. It’s essential to have a health emergency fund, keep your credit score high and debt low, and try to find other means of income before a financial crisis hits.

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