How To Manage Your Money In A Recession

2019/02/25

Recession is usually characterized by down-sliding stock market, increased unemployment rates and reduced consumer spending. When it happens, it affects the economy for a period of 6 to 12 months (sometimes, even longer).

It is the time when you must do a thorough re-evaluation of not just your stock portfolio, but also your savings and income. Following is a brief rundown on how to manage your money in a recession.

Stock Portfolio

When it comes to managing your stock portfolio, the first thing that is very important for you to keep in mind is that the value of those stocks that are directly linked to the everyday needs of general consumers do not lose their value even during a slumping economy. For example, companies that provide basic utility services often remain unaffected in a recession. Therefore, if you have already invested your money in stocks of those companies, you are safe. If you have not and are considering making an investment, such stocks make an excellent choice for you. When you redirect your investments like this, you can minimize the possible losses in your stock portfolio quite efficiently.

Grow Your Savings

Though it usually becomes very difficult to manage your money in a recession, the savings are still crucial. Most of the people who go bankrupt are the ones who never follow a good saving strategy. One of the best strategies to grow savings during recession is to save money in accounts that promise a higher return. Even if the returns are low (which is usually the case during a slumping economy), you are still advised to save as much money as possible. When you have enough money saved for emergency use, you can easily handle just any financial crisis. Just try to lock the highest interest rate possible while you are investing in Cds (Certificates of Deposits) and fixed savings accounts.

But, at the same time, you also have to make sure that the account you are investing in gives you enough flexibility to withdraw money without causing any penalty charges as and when needed. While you are focusing on various investment strategies to improve returns on your savings, you must also spend some quality time in creating a special recession budget, where your priority is to cut down your expenses to as low as possible so that you can save more. Depending upon your specific financial situation, budgeting may also mean practicing frugality for a limited time period. If it is the case with you, go for it. The more you save, the better you will be able to survive the harsh consequences of recession.

Income

While you are developing strategies on how to manage money in a recession, you must also work on to increase your income. To start with, if you are a salaried individual and a certain amount of money is deducted directly from your paycheck every month to cover your taxes, you will have to make sure that this is not a much higher amount than required. As per the recent statistics, the average amount of tax refund that salaried individuals get every year is $2500, which is obviously a big amount.

But, unless you get a refund, you cannot use this money. Therefore, talk to your employer and work on those factors that can help you reduce such monthly tax deductions. This is the easiest way to increase your income, which can be very helpful in surviving recession. Besides that, you can also try getting a second job or working overtime to boost your income.

Overall, when you work on your stock portfolio, savings and income while keeping in mind the above things, it will be very easy for you to manage your money in a recession.

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