Being in a recession is really scary! One of the biggest fears that people have during a recession is how their personal finance will be impacted: “Will I lose my job? Will I still be able to pay for my basic needs (food/rent). That’s why in this article, I will share how you can recession proof your personal finances so that you won’t have to worry about your money during this difficult time.
1. You Need to Calm Down
The first step to recession proof your personal finances is to calm down! Listen to your girl Taylor Swift! The worse thing you can do during a recession, is to panic and make rash decisions. So take a few deep breaths and continue reading, you got this.
2. Have an Emergency Fund
An emergency fund is money used for an emergency that you can access easily. An example of an emergency would be if you were to lose your job or have a health concern. The best way to store your emergency fund is in a high-interest savings account. Your emergency fund should only be around 3 to 6 months of your monthly expenses.
3. Cut your expenses
Now that you can’t even go out to hang out with friends, just save that money instead! Don’t use it to justify your online shopping addition! I mean unless you see a REALLY good deal I won’t stop you.
4. Pay-down your Debt:
For those with student debt, you are in luck. In Canada, the interest rate on the federal portion of your student loans are prime rate + 2.5%. From the 2020 recession, the prime rate dropped by a full 1% from 3.95% to 2.95%. 1% may not seem a lot but if you have a student loan of $50,000, that’s an extra $500 off the first year. Click here to learn how to calculate interest on your student loans.
5. Diversify your Income
The hard truth of a recession is that many people will lose jobs. This process is really out of your control but there are ways to mitigate the risk of losing your job.
When you were applying for university/colleges did you only apply to one? No! You applied to 3 or 5 schools to “diversity” and reduce the risk of not getting into a university.
If you have any extra money leftover, it’s time to invest. A recession opens a lot of opportunities because things are cheaper! If you buy things now at a lower price, in a few months or years the value WILL increase. Trust me, your future-self will thank you for it.
Read my article on How to Invest During the 2020 recession.
CONCLUSION – Recession Proof your Personal Finances
So to recession proof your personal finances in 2020, you should:
- CALM DOWN
- Have an emergency Fund
- Cut your expenses
- Pay of your debt
- Diversify your income
By doing these 6 things, instead of worrying during a recession, you will thrive! Let me know in the comments if you have any questions or concerns about recession proofing your personal finances.
Thanks for reading!