Finance has been a controversial topic lately. With the world economy experiencing a crisis due to COVID-19, everyone is looking for ways to save money. From looking into the cost of hiring a virtual accountant, to cutting out the little luxuries, everyone has their own method in these trying times.
When the economy began to shrink, I searched around for information on how to cope with recessions and found surprisingly little. So, I wrote this piece based on my experiences. It’s about practical methods of dealing with the economy and saving money during a recession.
Cut down on lifestyle expenses
I have brought this money-saving mentality into my own life. My husband and I decided we would never be able to afford a home right now, and so we moved into an apartment in the cheapest area of town that we could find. We live on a tight budget, and we’re forced to be extremely frugal with our grocery shopping/meal preparation and cutting down on smaller expenses like utilities and cable.
Some people may say it takes far too much time and effort to be frugal, but for me, that isn’t the case. Anyone can learn simple things like making meals ahead of time, buying new ones every couple of months, and even price matching with the store down the street.
Keep an emergency fund
No recession lasts forever. I am always confident that my emergency fund will provide a financial cushion when the next recession hits or unexpected expenses arise due to car trouble, home repairs, medical bills, or job loss. I’ll also free up mental space and peace of mind by eliminating anxiety about paying unexpected bills with credit or debit cards.
Emergency savings are a must these days. I prefer keeping at least six months of my income in an accessible fund, preferably in a savings account. This will give me money for bills, car repairs, emergency home repairs, or anything else that may pop up, such as needing an urgent dentist appointment or prescription medicines.
Hire an accountant
You may be thinking that hiring an accountant is a waste of money, especially when you’re trying to save money, but that’s simply not the case. Yes, you will have to pay for the accounting services, but having a professional to manage your finances is a great way to keep them under control. The small fee an accountant will charge is nothing compared to the money that can be spent on unnecessary items or investments. Plus, if you opted for a virtual accountant, that fee may be even smaller than expected. Not to mention, an accountant will have managed several accounts over the years, so they know exactly what they’re doing. They’ll be able to know if an expenditure or investment is actually worth it, saving money in the process. You need someone with experience and your best interests at heart, and this is one of the best ways to do so.
Strategize your investments
The recession is a challenging time for everybody, especially those who are struggling financially. However, by having a good financial plan and the right investments, one can weather the storm. Whether it’s an IRA, 401k, or other investment plans, people have a lot of control over how well they can survive the downturn.
I have always had a few investments that don’t increase in value. I don’t panic and sell just because one of my stocks is on the decline. When I diversify, I am spreading out the risk to different investing vehicles. This way, if one investment doesn’t do well, there are more than likely other assets that will make up for losses.
Get a second job
Getting a second job takes time away from my essentials like family, personal life, and sleep. However, if I am in desperate need of funds, then a second job could be an option. I always keep in mind that every moment I work is a time away from family or friends. If the extra money is critical, I will give no second thought about it.
Reducing debt is the fastest way to avoid a financial meltdown. While warning signs are an obvious good guide, it is possible to avoid debt problems entirely. Use caution when taking out loans from family and friends and consider using credit-cards only as a last resort.
I am a strong advocate of taking action. And saving money requires us to take actual steps by decreasing our expenses. The mentioned tips have rescued me from financial obscurity during past recessions.