We've heard a lot about the recession being triggered by COVID-19.
Over the past year, financial experts have weighed in on that very question. And while you may not be able to discern precisely when or if a recession will occur, there are some steps you can take to prepare for one. Avidia’s Executive Vice President and Chief Financial Officer Margaret Sullivan shares five such steps you can take:
- Prepare in good times. Most people don’t think about the impact of a recession until it’s upon them. That is why it’s important to save and build a nest egg in good economic times by saving regularly.
- Manage credit wisely. In planning for a recession, you want to ensure you have credit lines available for emergency expenses. Be sure to use credit wisely by charging only what you can afford to pay back and by making payments on time. This will help you maintain a good credit score, which is essential for obtaining affordable credit.
- Build an emergency fund. Financial experts have differing opinions on how much money you should have on hand to meet unexpected expenses or circumstances, such as a job loss. I recommend having at least three months of living expenses in your bank account. This should give you enough time to find a new job in the event you experience a job loss. In addition, if you have more money in your emergency fund, you can think about investing some of your funds for the longer term to maximize your savings.
- Cut excess spending. One of the most important rules in managing money is creating and sticking to a budget. Be proactive and think about ways you can maximize your budget. For example, could you save money by not going out to dinner as often? Years ago, when my husband experienced a layoff, we learned how to live on one income. When he went back to work, we continued to live the same way without increasing our spending.
- Keep your resume up to date. The fact is, none of us can predict if we may be impacted by job loss. Having your resume updated and ready will give you a jump start on finding a new job.
Take control of your finances.
By saving regularly, managing credit responsibly, and reducing excess spending, you can take control of your finances – even when economic conditions are out of your control.