You don’t have to be very cautious, but the economy doesn’t look very good at this point. To get started, Don’t look at your 401 (k) just now.from Collapsed stock market To Soaring consumer prices, recession I think that the Approaching..The news is annoying, but there are steps you can take to avoid panic and protect yourself as much as possible. During recession..
I spoke with Jen Smith, a personal finance expert. @frugalfriendspodcast When Instagram modern frugalityWho shared Her number one secret about what you can do now to prepare for the economic situation around the corner.
Let’s start by looking at your consumption habits
Smith says at least look at the end 90 days of your spending to see exactly where your money goes. When it comes to the idea of ”reduction,” many people panic and believe that they must radically change their way of life. Smith says this is a horror reaction and often not. “What you think you need to cut first,” like daily coffee or weekly happy hour, “usually can go to the end.” Smith shares that after looking at their spending habits, most people find that they can first reduce areas where they aren’t even aware that they’re wasting their money (Overlooked subscription remind).
In times of recession, the means to increase your income (pay raises, promotions, side hustle) are: exclusive. So while I feel it’s more ideal to start bringing in more money, Smith says, “it’s more important to focus on reducing than increasing income” to overcome temporary difficulties. increase.
Work on high-interest debt first
Smith presents two main approaches to tackling debt. And debt avalanche.Snowball target First your minimum debt, Avalanches take precedence regardless of interest rates Highest interest rate debt.. Smith prepares for the looming recession Debt avalanche.
As As mentioned above, your income is not as secure as during a recession. Compared to a gradual debt snowman, the avalanche method is your dependable method during the survival mode caused by the recession.
To use the Debt Avalanche Strategy Geek wallet It is advisable to sum up all the minimum amounts you have to pay for your debt (except your mortgage). Arrange in order from the highest interest rate to the lowest interest rate. Smith states that interest rates above 5-7% should be prioritized. So Make a budget To determine the maximum amount you can put to pay off your debt each month.
Start building a fund on a rainy day
It’s not too early to start contributing to a “rainy day”. During a recession, the brand name may change more accurately as a “rainy day”.Emergency funds. “
You want to set up a “starter” emergency fund, but as those reserves grow, Smith says that first tackling your high-interest debt is likely to be a higher priority. A potential guideline for what counts as a “starter” rainy day fund is about a month’s rent and insurance deductions. After reaching that amount, we will refocus on paying off high-interest debt. You can then resume creating an emergency fund that can cover more than 6 months.
Listen to your fears, but don’t live in them
Recession makes everything uncertain. Still, keeping your head cool is your greatest benefit. “When we are afraid, we make worse financial decisions,” Smith says. It’s important to take the above precautions, but it’s unwise to let fear control your life.
You can find Jen Smith On Instagram listen Frugal friend podcast Wherever you listen to podcasts.
What to do now to prepare for the recession
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