Dealing with a downturn
How to navigate a poor economy
October 25, 2013 by Mark Dye
There have been many articles and news stories about how the recession “officially ended” about four years ago. But many of us might see things a bit differently, as we’re still paying more for groceries and gas while earning less than our parents did when you consider inflation. Thankfully, there are things you can do that might make navigating a stormy economy a bit easier:
- Save Early and Often—The one good thing to come out of the Great Recession is an increase in the amount people are saving. The bad thing is that many still haven’t built up enough savings. So find places to save money in your budget and have at least $500 socked away—even better would be six months take home pay.
- Prioritize Debt—Get your debts in order and develop a plan on how to pay them down. What might cost you a bit more each month in extra payments will save your hundreds (and, in some cases, thousands) of dollars over the life of the debt.
- Focus on Your Credit—If you’ve had some credit issues in the past, now is the time to work on getting them in order. It might take a bit of time, depending on your financial past, but don’t let that stop you from taking action.
- Don’t Panic With Retirement—When a crisis hits, do not dig into your retirement unless that is your only option. Why? Well, take the fact that the market has doubled (!) since plummeting in 2008. This means that you’ve likely made up what you lost (and then some) if you kept calm and carried on. Remember that saving for retirement is a marathon, not a sprint.
- Shop Smart…But Still Shop—A market-based economy requires people to spend money on goods and services to function properly. So when millions of us pull back our spending it actually makes things worse. One upside of this is that retailers will pull out the stops to increase business, which leads to some great deals. So shop around and take advantage of things like interest-free financing for big ticket items like furniture and appliances—but only if your budget allows for it.
These are just five small things, but they might make a big difference during a downturn. Even better, they might get you in good enough financial shape to easily outlast the next.