Based on current trends, we may experience a recession sometime in the near future. While it might be easier said than done, try not to worry about a recession. As your neighbors and local lenders, our team supports you no matter what. That includes providing financial advice to help you with saving during a recession.
We want to see our Alleghany Highlands community members live out their dreams regardless of obstacles, so we recommend taking a few steps to prepare. This blog will discuss the dos and don’ts for handling your finances during a recession.
The Dos of Saving During a Recession
You can do many things to help you save during a recession, and a few of them are simple to get started. If you’re concerned about savings during a recession, here are some things you can do:
- Adjust your savings goals
- Cut expenses where you can
- Continue your investments
Do: Adjust Your Savings Goals
During a recession, you’ll want to revisit your savings plan. In a time when there’s a significant downturn in the economy, it may seem near impossible to think about saving money. But you should do your best to maintain this habit even if you can only set aside a little money each month.
Leverage Direct Deposit Options: Consider having your savings direct deposited into a separate account so that each time you receive a paycheck, the remaining amount that goes into your checking account is what you can spend. This way, you’re a step closer to achieving your savings goal.
Savings Nest Egg: Another type of savings account you should have is an emergency fund which can cover or offset expenses of an unforeseen situation. This kind of fund serves as a safety net that should only be touched in an emergency like an accident or an unexpected job loss. Many experts recommend putting enough money to cover three to six months of living expenses in your emergency fund. But this comes down to your financial situation.
Side Gigs: You may want to consider finding an additional source of income outside of your day job. This could look like picking up part-time work at a restaurant or storefront, becoming a rideshare driver, or starting a side hustle. Increasing your cash flow is critical during a recession as it can help you pay debts and make investments.
Do: Cut Expenses Where You Can
A recession is the time to start cutting back on unnecessary spending. Even if you’re living very frugally, there are many simple ways to save money.
Budgeting 101: Look at your monthly expenses and your account statements to identify what your money is going toward. It would be wise to reassess your regular budget or create a new one.
You should focus on your essential or fixed expenses (i.e., housing, food, water, and electricity) and prioritize paying off debt and building up your savings. Then, go over your variable expenses, which change monthly (i.e., pet expenses, dining out, and personal care expenses).
Ask yourself these questions:
- Is there anything I don’t need?
- Could I opt for substitutes instead of what I typically purchase?
- Are there any subscription services that I’m not aware of?
- Is there a coupon to help me save on my purchases?
- Should I use generic products over brand-name items?
Bills, Bills, Bills: There’s no shame in negotiating your bills. If you struggle to pay your monthly bills or have concerns, speak to your providers. Be as transparent as possible with them so they understand your situation. While some bills are non-negotiable, many out there are. You just have to ask! Certain expenses like your internet, phone, and TV could be bundled or discounted if you switch to a different plan. Your providers will likely want to work together to help you, so don’t hesitate to ask.
Do: Continue Your Investments
Pulling your investments during a recession may be tempting, but we’d advise against that. Historically, investors who have held onto their investments while the economy is down usually see their portfolios completely recover. No one can predict what the stock market will do once the recession ends, so try to commit to your investment strategy so you can participate in the recovery.
The Don’ts of Saving During a Recession
While recessions present our communities with uncertainty, we’re here to arm you with advice and support. Here are some things you should avoid when saving during a recession:
- Take on large debts
- Get discouraged
- Stop debt payments
Don’t: Take On Large Debts
When the economy is in a downturn, avoid assuming large or extra debts from car loans, home loans, shopping sprees, or flashy new devices. Risks increase during recessions, including the risk of being laid off or losing business income.
Taking on large debts could hinder your ability to repay your debt, resulting in penalties. If possible, wait to make any big purchases or pay with cash if you must. Just be sure to approach the situation with caution.
Don’t: Let Recession Get You Down
Typically, interest rates fall in a recession due to decreased loan demand, folks losing their jobs, and reduced incomes. But according to historical data, typically, our economy levels once again, causing inflation to return and balance to be restored. Remember: recessions are temporary, so don’t lose sight of your long-term financial goals.
Don’t: Stop Paying Off Your Debt
You may want to stop paying off your debts during a recession, but you should only do that in severe circumstances. Most financial experts say to prioritize paying off high-interest debt. This will save you more money in the long run by reducing the total interest you’ll pay over time.
Need Further Financial Guidance? Trust Your Neighbors at Highlands Community Bank!
Like we’ve said before, you can always lean on the team at Highlands Community Bank, no matter what. The team is here to help, whether you’re seeking financial services or need advice. We proudly offer convenient, flexible products like our wide selection of loans and savings accounts. Call us on our mainline anytime, or pop into your local branch!