Many people are concerned about the ongoing financial turmoil and how they will survive if financial markets crash as many experts anticipate they will. A crash in the stock market would mean that most people’s net worth will seriously deteriorate, making it much more difficult to function economically. Fortunately, there are many steps the average person can take to ensure they are financially secure in the event of a recession.
Sign up for a financial budgeting website
People are notoriously bad at keeping track of their finances, particularly in terms of how much they are spending on different facets of their lives such as entertainment, food or utilities. Using a personal budgeting website like mint.com is helpful because it will quickly calculate your average expenditures for you and give you clarity about just how much you are spending on various ideas. You can use a website like this to create goals for savings and to monitor any unwanted fees you may be getting from your bank.
Prepare for the worst and investigate unemployment insurance
Unemployment insurance and benefits plans vary by region and country but the process of investigating these options is nonetheless important. There are many insurance plans available that will provide the policy holder with a payout if they are laid off as part of a mass lay off program. A google search or call to an insurance agent will help you begin your inquiry into unemployment insurance options.
Scenario planning
It is important to use a spreadsheet to model out all of the scenarios that can potentially transpire and how you will respond to these financially. For example, if you are laid off, you will need to establish which funds are available to you and what investments you may need to sell to gain the cash flow to live your daily life. It is also important to factor in how credit cards, student loans and other major debts will be paid off in the event that a negative scenario takes place. Conversely, one should also have a plan for how they will invest excess money in the event that a positive scenario, such as no recession, takes place in the coming months.
If you are not comfortable with spreadsheet modelling, try adapting your own pen and paper budget to foresee what would happen in the event of a financial emergency. By realizing what will happen when your funds are being depleted, you will realize what items in your life are not necessities and need to be cut out to save money.
As was described above, there is undoubtedly many things to consider with the risk of a global financial recession greater than ever. However, if a few key steps are followed, it becomes easier to protect yourself in the event that a recession does in fact take place. These pieces of advice will help you regardless of the economic situation to ensure you plan and save responsibly and do not find yourself in debt.