It is not common for Americans to know at once that expansion has come to an end and an economic stability recession has started, however, things are quite different in terms of the COVID-19 and it has proved to be historic. In just a matter of a few days, Americans have witnessed how coronavirus confirmed victims skyrocketed worldwide, compelling nations to impose lockdown, stay-at-home guidelines that have culminated in shuttered businesses and millions of layoffs. According to the data presented by the Department of Labor in the United States, over 10 million Americans have filed for unemployment during the month of March with practically all industries experiencing job loss.
You need to understand that a recession may not be characterized always by a dramatic plunge in overall business activity. As per the textbook definition, the beginning of an economic downturn is supposed to be the point when we can see that things are not going well as they have been. The economic outlook seems to look pretty grim at this point, hence, it is high time to start ensuring financial stability by being well-equipped to combat economic recession triggered by COVID-19. Here are some effective tips to fortify your finances and make them truly recession-proof.
Adam Veron Asks You to Focus on Paying Down Debt
It is of pivotal importance that you focus on paying down all your outstanding debt particularly, a high-cost debt like credit card balance for creating some breathing space in your budget. As the COVID-19 pandemic has shown that the economic downturn could often result in loss of jobs. In the case, you are stressed about job security, it is best to pay off your existing obligations so that you could enjoy peace of mind in these distressing circumstances when worries about health are already driving you crazy.
Focus on giving priority to credit card debt. You could then think of other kinds of loans like auto loans or mortgages. Adam Veron says that irrespective of where you are presently in the market cycle, you must give top priority to eliminating high-cost obligations and high-interest debts so that you are better prepared and well-equipped to encounter challenging circumstances.
Pay Attention to Boosting Emergency Savings Insists Adam Veron
Job loss or unemployment could make things extremely challenging for Americans in terms of managing day-to-day expenses. If you focus on fortifying your emergency fund or the pool of funds that are kept reserved for precise events such as economic downturns, you could still be in a position to afford all your essentials while looking for another job. Even if you are focusing on paying off your existing debts, you must keep on prioritizing saving. You must boost your emergency fund and make sure that you have at least, a month’s worth of day-to-day expenses. Then start paying off your current debts. Gradually, shift your focus to boosting your emergency fund and ensuring that you have a minimum of three months to almost six months ready funds for taking care of daily expenses.
Adam Veron Asks You to Identify Ways to Reduce Expenses
You must always examine your monthly expenses. Focus on identifying the items that are discretionary and make a list of essential items. You could eliminate the discretionary items now or later when the situation seems to get worse in the future. Always look for ways to effectively reduce your living expenses.
Conclusion: Try Living within Your Means
If you wish to withstand implications of economic downturn, spend a maximum of 30% of the net earnings post taxes on the identified discretionary items. It is a wise move to chalk out a perfect monthly budget for making sure that you are not overspending but living very much within your means.