While normally it’s recommended that a two-income couple keep three months’ worth of expenses in an emergency fund, during a downturn the recommended amount is six months’ worth instead. [2] X Expert Source Ara Oghoorian, CPACertified Financial Planner & Accountant Expert Interview. 11 March 2020. This is especially important if you’re in an industry that gets hit hard by a recession (e. g. , construction, financial services, food) and if you’re a one-income family. Dual-income families may be safe with three or four months’ worth of savings. If you’re self-employed, you should set aside up to a year’s worth of expenses.
Money saved from not having to pay debt repayments can then be saved for your emergency fund or otherwise saved. Saved money can be invested in securities when their prices drop during a recession. [4] X Research source
Even if you can only make an additional $500 or $1,000 per month, this extra income can help you get through tough time if your primary source of income dries up.
You can also look outside the market to invest in real estate, like land or apartments, that will usually appreciate in value over time, sometimes even through recessions. [5] X Research source
Now is the perfect time to set an example for your children, and show them how a family can pull together during tough times and everyone can chip in. [6] X Research source
Cut discretionary spending. Buy nothing if you don’t need it to live. Resist sales pitches. Don’t even think about using that new credit card offer in the mail, even if it does have a low APR and no payments for two years, you should evaluate it carefully. Transportation: Carpool as much as you can. Consider commuting by bicycle or even living without a car. But if that’s not practical, look for ways to save money on gas. Housing: Get a roommate or consider relocating to an area with a lower cost of living. Maybe you can move in with family members until the economic downturn blows over. Keeping the peace in a multigenerational household isn’t always easy, but it has its own rewards. Food: Stop going out to eat; instead, try to cook at home from scratch more often. Consider the benefits of the slow food movement. If you don’t have enough time to cook, try doing it just once a month. Find good deals at a local farmers’ market. [7] X Research source
If you don’t have a job, find other ways to make money fast. Focus on cutting your expenses, as described in the previous step, and consider volunteering; if you’ve got the spare time, there are organizations that will need your help, and you could build good karma in your community.
Take a portion of your paycheck and move it to a savings account right after you get paid. [8] X Expert Source Ara Oghoorian, CPACertified Financial Planner & Accountant Expert Interview. 11 March 2020. In addition, putting money into the stock market during a recession can be a wise move. If you buy stock in reputable companies when prices are low, you stand to gain a lot of money when they come back up out the recession.
Cutting your advertising spending. Pull out of traditional advertising like television and radio and instead focus on improving your social media presence. Doing so is free, even though it might take more of your time. Downsizing. Your other option to downsize. This can mean either reducing employees or moving to a cheaper location. Your remaining employees may have to work harder, but your business will at least be able to survive. [10] X Research source
A recession is also a good opportunity to evaluate your customers. You may have those customers who are not profitable to work with. A recession is the perfect time to sever these relationships and seek new ones. [12] X Research source
