Recessions are inevitable and while we can't predict when they will happen, we can take steps to prepare for them. Cyprus Credit Union has five ways to recession proof your finances.
EMERGENCY SAVINGS
Having money set aside, any money at all, can help prevent at least some unnecessary debt from credit cards or loans. Keeping these funds in a high-interest regular savings account will allow these funds to maximize interest but still be liquid enough if you need to access them on short notice.
HAVING A BUDGET
Being able to live within your means and maximizing every cent you make during the good times will better prepare you to live through a recession. If you don’t already, sit down and draw up a budget. There are several different methods, so it’s important to find the one that works best for you. If you have a budget, but aren’t sticking to it as closely as you could, try to start doing so.
PAY DOWN DEBT
Paying down your debt should be included in all budget planning, just like regular expenses. Create a debt elimination plan so you’re working towards this with a set strategy and not just paying off debt here and there randomly.
CREATE ADDITIONAL STREAMS OF INCOME
If you are able to, try and have another source of income. While it may not completely replace a lost or reduced income, it can help fill the gaps in the event of a job loss.
RISK TOLERANCE
Your risk tolerance is what you are prepared to lose when it comes to investing. This is usually dependent on your age and how close you are to retirement. Don’t let yourself make long-term decisions based on short-term circumstances. The stock market is cyclical and you won’t lose anything if you don’t sell.
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