The COVID-19 pandemic is crashing the global economy and it’s becoming clear that we are in a recession. Unfortunately, a recession is something beyond our control, but what we can control is how we respond and prepare for a financial recession. Now is the time to take proactive steps to survive the global recession.
Here are some ideas we offer that may help you survive a COVID-19 recession.
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Save your Emergency Fund
Your job hours have been cut back, you’ve lost your job, your business isn’t making any money, or you made some poor financial decisions, emergency savings will give you a safety net to fall back on so you can ride the wave and emerge from the recession back on your feet. Tough times always last longer than you would think, so debts from these times are always greater than anticipated. Since most people are used to living on their entire paycheque, they don’t have anything extra to repay this debt. So, they have to either increase their income or significantly downsize their lifestyle to afford to repay the debt at their current income level.
If it’s possible, try to save about 3 to 6 months’ worth of your wages, so when money is tight, you won’t have to turn to credit. Using credit as a safety net is a mistake that often haunts people for years after the fact. Most don’t foresee the reality that they will need a larger income than they currently have to both repay the money (plus interest) that they borrowed during the rough patch.
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Control your debt
Nothing will hurt more than having high-interest debt when your finances are squeezed. During a recession, it is difficult to cover day-to-day expenses let alone debt repayments and this can cause your debt to spiral out of control. Carrying high levels of debt is very risky because a slight change in external factors could affect your ability to pay your debt. Although you may be able to manage payments now, a job loss or an interest rate hike combined with banks tightening credit limits could change that for the worse. The first step to successfully paying down your debts is establishing a budget that accurately reflects the money coming into your household, and where that money is supposed to go.
Cut unnecessary spending and make a budget
You may be stuck in the house for days. It may be tempting to let online shopping help alleviate the boredom. However, if events take a turn for the worse and you find yourself without income, you may be glad of any cash you are able to save now. Consider putting a budget together to examine how much cash is coming in, how much is going out and what your short- and long-term priorities are. Planning, budgeting and saving now may put you in better shape if your situation gets worse.
Make your credit score excellent
If you have a great credit score and a low debt load, you’ll be in a position to get preferable lending rates if you need it. You can keep your credit score healthy by paying all bills on time if not in full. If your credit is not what it should be, ask your bank how you can repair it. It may mean paying off credit cards efficiently or fixing old credit issues, but the better your credit, the easier it will be if you have to take out a loan.
Be more useful at work
A steady paycheque may make all the difference right now so make sure you’re essential at work. If you’re feeling unproductive and down at this time, so might your employer. Now is a great time to be the employee who helps solve their problems and guides them through to better times.
Continue your education and improve your skills
If time allows, bulk up your resume and see how you can upgrade your skills and make yourself more valuable to your job or to a future job. If you are suddenly unemployed. This can be formal, certified training for your occupation or it may be more casual learning on the internet.
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