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This post is all about how to manage your money in a recession.
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What Really Is An Economic Crisis?
An economic crisis is a slowdown or downturn of a country’s economy happening rapidly which leads to lower productivity, less liquidity, low levels of trade, less confidence in the market (investments), increased inflation, possibly hyperinflation or deflation/depression, connected with immense lay offs and increasing unemployment rates.
An economic recession happens normally every 7-10 years. During the 19th and 20th century, many economic downturns left a heavy toll on millions of people. In times of globalization and interdependent economies and markets, a global crisis has an effect on every country.
How Much Money Is Enough To Get You Through Hard Times
Your Emergency Fund
Every situation is unique, which is why the money you need to have to get you through hard times depends largely on your lifestyle and your monthly expenses.
How big is your family? Do you have any dependents?
Are you prone to getting sick?
Do you have a lot of fixed costs that are a bit on the higher side?
Do you have debts?
Are you renting or do you have mortgage payments?
In recent years, many finance advisors have advised to build an emergency fund of at least 3 to 6 months worth of expenses.
But is this really enough to have a restful sleep and not worry about what’s going to happen should a crisis last more than 6 months? You want to start with $1000 dollars as Dave Ramsey suggests because you never know what life will throw at you. From there, you can build it up after continuing to pay off your consumer debt. If $1000 dollars seems too much currently, start with $500.
Related: How To Build A $500 Dollar Emergency Fund
Recession and what does it mean globally
The Global Markets
Interest rates across the globe are now at a 15-year high, and money is not readily available. Seems a lot like a downhill curve. We will see in the coming weeks but my guess is that before this whole thing gets better, it will get a lot worse first, unfortunately. When people lose their jobs or have no money, they won’t go out and spend money on eating out, even if it is in their budget. They’ll use the money towards groceries instead which is cheaper and can be stretched longer.Budgets will be re-evaluated and adjusted and the focus will be on necessities over wants/nice to haves.
Reduce your expenses in uncertain times
One thing many families can do now, especially if they lost their jobs temporarily, is to cut out immediately all non-essential expenses. This includes all unnecessary subscriptions. Sit down and go through your monthly expenses, and then again. See what you can eliminate and don’t need to spend money on. At this point in time, you should really focus on these main things only: shelter, food, lights, transportation, phone/internet. You should cut out any charges that are unnecessary and create a budget and start saving today!
Continue To Pay Your Bills
Paying Bills and How to Stay Current
One thing you definitely don’t want to do is postpone too many bill payments. Even though you might have been laid off, postponing too many bill payments will eventually catch up with you a few months down the road.
If you are really tight with money though, this option might be the only one for you right now until you get rehired or find a way to make money while the shutdown is continuing. If you do have money to keep paying your bills, then this option might be better because you will be current on all of your obligations.
One thing for sure, you want to continue to stay out of debts during this downturn and not add to your debts unnecessarily.
1. Pay the bills, the day you get them.
2. Pay the smallest bills first, then focus on the larger ones.
If you must, you can call your providers (hydro, banks, etc.) and see if you negotiate partial bill payments. Call your bank if the bank can do something about your mortgage or any other loans, if you must. Some mortgage payments have been deferred for 6 months.
Credit Card Payments
If you are currently laid off and you still have to pay off credit cards, then there are two methods that you can continue to use.
1. Pay the minimum balance off every month by choosing the credit card with the highest interest rate.
2. Pay minimum balance every month and tackle your credit cards with lowest to highest amounts.
Find Other Ways to Make Money During a Recession
1. Sell Items From Your Household
Sell any unwanted stuff from your home if possible. You can post what you want to sell on various websites (FB Marketplace, Ebay, Kijiji, Craigslist, etc.) to bring in some extra cash. Have a garage sale in the spring and summer time.
2. Deliver Food Or Packages
Even though many businesses have shut down, new opportunities await. If you have lost your job due to the current crisis, maybe you can find substitution work.
Even though restaurants are closed, many restaurants are still allowed to deliver food. Try becoming an Uber Eats driver, or see if Amazon hires currently.
See if a grocery store near you is hiring currently since they are overwhelmed with orders and panic buying.
3. Become A Delivery Guy
Sign up with Uber Eats, Skip The Dishes, or any other food / grocery delivery companies to deliver food and make money! If you have a car, use it.
See if your area is hiring for Amazon Delivery. These are essential jobs and will continue to ride through recessions.
4. Find Jobs Online
There are many survey sites, where you can make money. MyMillennialGuide.com has a nice list that you can see here.
5. Start Your Passion Project – Start a Blog Today
If you’ve been laid off and do have a bit of extra money that you are willing to spend, maybe now is the time to start a blog? How To Make Money With A Blog? It takes some serious work and time to make money with your blog but it is possible. There are many ways to make money with your blog.
You can display ads and make money as well if you have a lot of visitors/readers coming to your page or via affiliate marketing. Maybe this is the time to start your passion project?
If you want to learn more about affiliate marketing, check out Michelle Schroeder-Gardner’s course “Making Sense of Affiliate Marketing”. I have completed the course and it has helped me get an understanding of what affiliate marketing really is and how it can be used on your blog to eventually make an income.
Learn how to make money online with affiliate marketing with this course today!
Final Note
An economic crisis can happen but you don’t have to feel unprepared. It is a time when you can start preparing for the next one. Most importantly, you need to have low expenses and find other means to make money to help you overcome financial problems during these trying times. Start with your $500 or $1000 dollar emergency fund and build it up from there. Stay current on bills as much as possible and don’t become a victim to debt. The main goal is to keep yourself and your family afloat during these times so you will have to become creative. Don’t give up. Every crisis also gives way for opportunities.
This post is all about how to manage your money in an economic downtown.
Image Credit
“Recession” – Unsplash