Unfortunately, economic downturns are very common, and generally expected. Whether the economic downturn is caused by a pandemic or a normal recession, there are some ways to help minimize its impact. Below are some helpful tips to help you stay as financially stable as possible.
Avoid Using Your Emergency Fund
As you may know, at Dayton and Sydney, we highly recommend everyone has an emergency fund to fall back on. An emergency fund is a savings account with a few months’ worth of living expenses to help you pay your bills during financial hardship. However, your emergency fund should be used as a last resort. For example, if you have zero income coming in and are not able to pay your bills, then your emergency fund should be used. However, if your hours were reduced due to an economic downturn, and you can still pay your bills with your income, your emergency fund should not be used. It is best to avoid using your emergency fund until you are faced with a real financial emergency. This will help to ensure the money is there for you when you need it most.
Reduce Your Living Expenses
During an economic downturn, it is best to reduce your living expenses as much as possible. Many people struggle with lifestyle inflation, which is a concept that when you earn more, you spend more. People who deal with lifestyle inflation don’t need to spend more in certain areas, but they can comfortably do so. If you are in this situation, review living expenses you can cut. For example, many people are willing to spend more on name brands, rather than generic products. While these purchases may be desired, during an economic downturn, your spending can be modified. Think back to the days when you saved every penny you could on daily essentials before you had a career. Modified spending during an economic downturn should have much less of an impact.
Prepare for Layoffs
During economic downturns, it is very normal for layoffs to occur. This is why it is important that you do everything you can to be prepared in case it happens to you. Save as much money as you can for your emergency fund, and get your resume ready. Think about the financial responsibilities you have and be sure you can pay for them for a few months while you are looking for a new job. This will help you to have less stress on your shoulders if you do suffer a job loss.
Contact a Financial Professional
If you are worried about how your assets and liabilities will be affected during an economic downturn, it may be a great idea to contact a financial professional. They can help you make the smartest financial choices as possible during an economic downturn. Our team of financial professionals at Dayton and Sydney are excited to work with you and help you get your finances stabilized. So, contact us today if you are looking for professional financial assistance in the Long Island area.