Saving for a Financial Downturn
Speaking from experience I can say it’s all too easy to deny the financial issues to yourself but they will not go away. They won’t. There are many steps you can do to minimise the impact of the economic downturn, and they must be taken now.
Accumulate funds for emergency savings. In an emergency your going to need money in a hurry so a savings account allowing easy, penalty free access to funds for hard times is essential. It is advisable to build up rainy-day savings accounts to a level worth about three months of regular living expenses. The best place to park this money would be in a high interest savings account.
Increase Your Savings. Try to arrange for an automatic savings plan. This arrangement enables you to set aside specific amounts of cash automatically transferred from a checking account to savings accounts earning high interest or to a mutual fund of your choice. It is important that the money go into a high interest savings account but remain available. Simply having a retirement fund is not enough as you can’t get access to that money now.
Reduce your spending. This move may be obvious, but it can be a very hard step to take. Bundle your cell and landline phones together to save money. You can get discounts from telecommunications carriers this way. It also doesn’t hurt to talk to at least two carriers to look for the best deal. Spend less on your weekly grocery bill by choosing supermarket own label brands, going to markets or joining a local food co-op. Cut back on a card and join a car pool or use public transport. If you have two cars and one is seldom used, consider selling the other one. Put all the money you save in a savings account intended for the rainy days.
Reduce credit card debt. When your income drops then you have to cut out non essentials and stretch money further. It does not make sense to shell out your hard-earned money to pay 17 per cent (or whatever) interest on credit card debt. Try to pay off in full the balance due each month; if that is difficult, at least pay much more than the minimum amount. Consider moving from credit to Visa debit
Increase household income. This could be tough to do during the recession. But you can invest some of your time in your skills and make additional money doing it. If you have a skills such as writing or any other service people might want then you could offer your services as a freelancer online or in your local area. In single income households the partner could try and take on casual or one off jobs for extra income. You could start a small business which might blossom into something bigger once the recession is over.
Understand and use allowable tax deductions. Be on the lookout for tax deductible expenses such as education, charitable donations and your home office. Stay organised and strict with logging your expenses and receipts to support tax claims. Put the money saved on personal tax deductions into your high interest savings account.
Revamp your resume. Recessions can lead to more layoffs. It is best to polish the résumé to make it current, in case the need to apply for a new job arises. Condense the résumé to one page, as much as possible. Make it look neat, clean and professional, not too flashy. It is your work experience that should stand out.
Don’t wait for the crisis to hit you, by that stage it will be much harder. This will give you a strong sense of purpose even as it shores up your position.
Related posts:
