4 Ways to Recession Proof Your Family Finances
It doesn’t take an economic wizard to know that we’re living in tough times. It’s easy to get overwhelmed, but there are still ways to protect your finances and try to make your family recession proof. During difficult economic times it’s more important than ever to be prepared for unexpected setbacks. Don’t panic if you can’t do everything that suggested here right now. Do what you can – and when things get better, keep these tips in mind and don’t fall back into bad habits.
- Get out of Debt!
Ask any financial expert the best way to recession proof your finances, and the #1 answer is bound to be get out of debt – especially credit card debt. With so many people defaulting these days, credit card interest is getting higher and banks are less willing to negotiate lower interest rates – making it even more crucial to eliminate or substantially lower your debt. Paying down several credit cards? See if you can consolidate them, or consider getting a single, lower interest loan to pay them off. Once you’ve got the credit card debt under control, try to pay for things either with cash or using a debit card that takes money from a standing account.
- Start an Emergency Fund
As contradictory as it sounds, you should attempt to save as much money as you can during an economic downturn. Every family should have an emergency fund with enough money to live for at least three months – it’s never too late to start one, and no amount is too small to be saved. If you already have some money in savings, shop around to see if there’s someplace else you can put it where your account will earn more interest. A .5% increase might not look like it’s worth the effort, but that small amount could add up nicely over time. Extra hint: also do this for each of your insurance policies before renewing them; there’s a good chance you can get the same coverage elsewhere while paying smaller premiums.
- Watch your spending
Pay careful attention to where your money is going, and keep an eye out for opportunities to spend less whenever possible. Avoid big purchases except when necessary. For one week, write down every penny you spend and where you spent it, then look to see where you can cut back. A few dollars here and there can make a noticeable difference. Before you go grocery shopping, for example, take the time to make a weekly meal plan and a list of what you need – it’s a good way to avoid buying things on impulse. Be on the lookout for sales and coupon offers. And buy generic whenever you can, especially for dry goods and cleaning products. Making careful, thrifty choices can reap immediate benefits and as a bonus, it sets a good lifestyle example for your children.
- It’s a Family Affair
Get the entire family involved in making smart financial choices. If your children are old enough to spend money, they’re old enough to play a role in managing it responsibly. There’s no need to burden them with major adult-level concerns, but do include older kids in regular family meetings about budgeting, and even younger children can come up with money-saving ideas. Here’s one: join forces with friends and neighbors, clean out the closets and have a massive garage sale. Earmark the money you make for savings or debt reduction – but put a small portion aside to treat everyone for their efforts.