Financing Your Life A Guide to Controlling Your Finances, Today Related Articles
Whenever the market endures a sustained dip, the news and pundits begin contemplating the
likelihood of another recession. While a downturn in the market isn’t always indicative of a
recession, we need to get used to the reality that we could see another recession within our
lifetimes.
Ideally, you should be working toward creating a recession-proof financial life during times
when the economy is good. Today, I want to give you five tips to do just that.
1. Live below your means. When you adapt to living below your means, the idea of “living
with less” isn’t as scary. You already understand how to make sacrifices and have taught
yourself how to be disciplined and happy while enjoying a more controlled spending
environment. Even better—you can aggressively fund your savings, which will help you
weather any economic storm.
2. Save, save and save some more. The true key to financial independence is savings. The
more money you have saved, the more financially secure you are and the better able
you’ll be to ride out a catastrophe such as a job loss or recession.
3. Increase your skills. The job market constricts when we’re in a recession, which means
you need more skills to be seen as an appealing candidate to employers. It’s not a good
idea to wait until the recession is in full swing before boosting your skills. Instead, beef
them up now while the economy is good and you aren’t desperately looking for work.
4. Think “repair” instead of “replace.” It’s difficult to recognize how spoiled we become
when the economy is booming. When the economy is doing well, many people don’t
think about repairing appliances and cars that break down, but instead think about
buying new replacements. Train yourself now to focus more on repairing than replacing
and it will come naturally if a recession makes this kind of frugality necessary.
Remember, the more you spend today, the less you save. Don’t be afraid to challenge your own
interpretation of need and rethink your spending habits now, in the good times, so you can get
through the rough times more easily.
