Shield Your Finances: How to Recession-Proof Your Life with Confidence in 2023
It can be daunting to think of navigating a recession, but you don't need to feel powerless. Take hold of the reins by being proactive and taking objective steps to ensure your financial success and security. In this article, we’ll walk through powerful options to help you recession-proof your life and maintain job security during these uncertain times.
Check Your Mindset and Evaluate Your Relationship with Money
If you’ve read any other Confidence Daily article, you know the deal: success starts with your mindset. The fact of the matter is that the world can be going through a recession and people may be getting laid off left and right, but that doesn’t mean that this has to apply to you. The first step to recession-proofing your life is to recession-proof your mind.
So, we know a group of you are thinking, “Yeah that’s great, but I’ve already been laid off,” and while that may be true, it doesn’t have to dictate your financial future. If you find yourself in this predicament, accept your present circumstances, allow yourself to feel all the feelings you have about the situation, and then see the opportunity in it: this is a chance to reset and decide what you want from your life and decide how you’re going to get it. Sometimes crappy situations have to happen to shake you up, get you out of your routine, and help you refocus on your calling and purpose, rather than simply getting through. Of course, this doesn’t take away from the harsh reality that bills are due, but it opens your eyes to the possibilities.
Stay Informed
About a year ago, economists were split on whether or not the economic downturn would be a full-blown recession. While that dispute has been settled, it’s still important to keep a pulse on the market and how different assets are performing so that you can inform your investment and savings strategies accordingly. The logic here is to stay ready so you don’t have to get ready. Here are a few sources we use to stay in the know:
Create a Budget and Stick to It, Then Focus on Saving
We know that “budget” isn’t anyone’s favorite word, but it’s a fundamental element of financial security. Andrew Latham, Certified Financial Planner and Managing Editor of SuperMoney.com shares that this simple but invaluable tactic is crucial as it relates to Peter Drucker’s famous quote “What gets measured gets managed.” To ensure that you’re making the most of your money, you have to understand how you’re spending it and make a plan to optimize your cash flow by following a budget.
Saving money is a daunting task, but it's crucial for financial stability, especially if you have long-term goals like starting your own business, having an enjoyable retirement, or simply wanting to buy a home. Creating a plan to save a specific amount of money each month sets a clear goal and helps to achieve it. Start by analyzing your spending habits.
If you’ve determined that you’re spending too much in a particular area, it may be time to cut back. Eliminating some of your unnecessary expenses can be a powerful way to boost your savings and improve your financial stability. Maybe you're spending too much on eating out at restaurants or splurging on subscription services that you hardly use. Whatever it may be, identifying areas where you can cut back is the first step toward taking control of your finances. I get it, this is a lot easier said than done, and budgeting isn’t my favorite thing to do either. If you’re having a tough time trimming the fat, one thing you can do is assess what brings you the most joy and keep those items while putting some of the less satisfying items on the back burner for now. The key is to have everything you need and some of the things you want to create a sense of balance and joy without overspending. Remember: being budget-conscious doesn’t mean living a dull life.
Stack Your Coin
This isn’t exactly news to anyone, but if you want to be prepared for a rainy day, your best bet is to start saving what you can now. When you’re working on your budget you’ll be able to calculate how much money you can put into your savings account without jeopardizing your monthly expenses. Once you commit an amount, stick to it. If you have trouble with this, one approach is to pay yourself first by allocating a certain amount of your paycheck to be automatically routed to your savings account so that you don’t have to worry about meeting your savings goals. An added benefit of automating the process is that it doesn’t feel like you’re missing out on anything because you never had to touch or reroute the money in the first place.
Identify Low-Risk Investments
The world of investing can often be unpredictable, with markets fluctuating and investments rising and falling seemingly at random. However, for those looking for a more stable option to build long-term security, low-risk investments could be an appropriate fit. So, what makes an asset safe or low risk? Safe assets are less likely to be affected by market volatility and provide reasonable returns over time. Some examples include high-yield savings accounts, Treasury bills, and corporate bonds. While it will take some research and due diligence to identify assets that are right for you, the peace of mind they can bring is well worth the effort. So don't let the volatility of the markets deter you from investing. Many millionaires are made during economic downturns, it just takes a little research and guidance from a professional. That brings us to our next tip…
Don’t Go at It Alone
In these uncertain times, it's important to have a solid plan in place to ensure your financial stability. It can be hard to ask for help, but seeking professional advice from a financial advisor or accountant is an important part of your plan to recession-proof your life. Many people shy away from working with a professional because it means that they’ll have to admit their shortcomings or come clean about bad habits. Here’s the deal: your pride isn’t going to save you money, and guess what? They’re used to seeing people who have made a mess of their finances; that’s why there’s a whole industry that requires their expertise!
From creating a budget to investing wisely and avoiding common pitfalls, their guidance can help you achieve greater financial security and peace of mind. The best thing is that they can take your goals and current financial situation into consideration to build out a plan that optimizes where you are and helps you get to where you want to go.