How to Improve your Finances – Even in a Recession

The United States economy officially crossed into recession territory a few months ago and ever since the word “recession” is everywhere. For two consecutive quarters the countries GDP was in decline. But debates have spread across the internet about if we really are in, or are headed towards, a recession. Whether economists want to call it a recession or not, the facts remain. Inflation is not under control, interest rates will continue to be increased by The Fed to try and rein it in and the stock market continues is’t bearish trend. This is concerning for many reasons, but one of the biggest is that too many people will use a recession as an excuse not to improve their finances. The good news is there are still many things you can do to improve your finances in a recession! While some of our advice remains constant no matter the state of the economy or the markets. The importance and or urgency becomes magnified in times when our buying power is in decline, interest charges tick upward and the stock market is bearish.

7 Steps to Improve Your Finances in a Recession

Pay off Expensive Debt

This will always be at the top of any list on how to improve your finances, no matter who you talk to! As interest and inflation are both on the rise it’s critical to make the most of your money. As we speak your buying power is dropping like a rock – don’t make it worse by paying ridiculous interest rates! Talk about salt on the wound. In the next few months you need to prioritize paying off debts that are causing you to have to work even harder to get ahead!

Ready to be debt free once and for all? Keep reading about the best way to get out of debt

Stop Paying for Convenience

Convenience is overrated and you’re overpaying for it. It is not lost on me that a lot of people who have the habit of constantly paying for convenience, commonly struggle with feelings of boredom and lack of fulfillment. The fact is when we do things for ourselves we don’t just save money, we feel accomplished! Consider trading empty down time to ‘Netflix and chill’ for time cooking a delicious meal for yourself or DIY-ing a household task.

Get a Side Hustle

The whole country is short staffed right now and wages are on the rise, meaning one thing. Getting a side hustle could not be easier or more lucrative than it is today. It might not be anything glamorous and you may lose some “me time” but get over yourself. [Yeah, we said it.] There isn’t anything worth having in this life, that isn’t worth working for. Especially when you’re talking about Financial Freedom! No one said improving your finances in a recession would be easy. We just said it was possible. Pick up an hourly gig for a few nights a week and see how fast you get to your goals! You could start your own thing too, being an Entrepreneur is wonderful! But starting a business takes more time, energy and money before you see a return. Decide which approach is right for you based on your goals and timeline.

Review Needs vs. Wants

When things get tight financially it’s a great idea to review expenses and weed out things that are not truly necessary. As you go through your budget and account statements, make a list of subscriptions you need to cancel or habits you want to improve to reduce spending. This exercise requires you to get honest with yourself and to know the difference between things that are “nice to have” but not critical to your survival or even happiness. We think it is important to remember the importance of finding a balance between wants and needs. It is our philosophy to create even just a little bit of space in your budget for things that might not be necessary for survival, but that do bring you joy. The goal isn’t to make yourself miserable, the goal is to have a budget that is realistic and sustainable! Want to be more self aware and mindful when it comes to money management? Read How Journaling can help you reach your Financial Goals

Master Your Budget

If you’re serious about improving your finances in a recession, you need to get serious about your budget. There is a reason everyone suggests budgeting – it works! But you already know that. Knowing the importance of budgeting isn’t the problem for most people. The challenge is not knowing how to make a realistic and functional budget that is custom to your lifestyle. Of course we could talk budgeting until we’re blue in the face. If you’re serious about mastering your budget once and for all, read How to Make a Budget that Actually Works and check out our online budgeting course. Both of these resources will walk you through the budgeting process step-by-step plus provide you with other tools to help you track your Cash Flow and your increasing Net Wealth.

Save Cash

There is a growing trend of consumers buying items on their “future” shopping lists to get ahead of inflation and supply chain issues. This might sound like a good idea, but it is important not to get carried away. In times of a recession you want to ensure you establish and maintain a full 6-month Emergency Fund. This is best “kept liquid” ideally in an easily accessible High Yield Savings Account with your local credit union.

Consider a Roth Conversion

You’ve heard of “buying the dip” – well we prefer to convert the dip. Meaning you convert a 401k, Traditional IRA, or other pre-tax retirement account to a Roth while the market is down. It is important to know that this is a taxable event. But it saves you big on taxes in the long run. Meaning that the amount you convert will be counted as income for the year. The benefit is that the money will now get to grow tax free until retirement. Which is why it is one of our favorite things to do when the market is down. While this might sound complicated, it isn’t.  Of course, always do your research and talk to a tax professional to ensure this is right for you. If you have any general questions, send us a message!