For months, we’ve been talking about our topsy-turvy economy and what it could mean for your finances if we experience another global recession. And while the sheer occurrence of a recession isn’t anything to get worked up about on its surface, the spectre of the previous GFC is still weighing on a lot of us.
Maybe you lost your job back then, or couldn’t get an adequate one when you graduated high school or university. Maybe you fell behind on your mortgage, or had to hold off on trying to sell your home because the market was so bad. Maybe you had to make other hard choices to get by that you’re still dealing with today. That’s why it’s so scary to think about what’s happening in the economy right now.
Several signs are pointing in the direction that the US will enter a recession in the near future – if it isn’t in one already. And as the 2008 GFC showed, what happens to America’s economy tends to have a ripple effect around the world.
Here at Lifehacker, we endorse caution over panic. With that in mind, now is the time to choose financial adjustments that can make your money less susceptible to the impact a recession could have on your lifestyle or livelihood.
Among the steps you can take right now, paying off debt ranks high. Paying down debt will leave you with fewer or lower bills if you have to pare down your expenses; and if you build up your emergency fund, you’ll reduce the chance you’ll need to turn to those lines of credit in a pinch. If you have a variable loan and make voluntary repayments, you can also shift some of the balance over to your emergency fund in the event that a recession hits.
And, of course, it may serve you to rethink major financial decisions, like buying a house or taking out a big car loan. We’re not saying to cut back spending altogether —bremember, don’t panic! — but cautious optimism is always a healthy choice for your money.
We’ve also heard from a lot of you in the comments section of previous money articles. Some of you are paring back your expenses a lot to brace yourselves against a worst-case scenario.
Tell us: What are you doing to prepare your finances for an economic downturn? Are you making small changes are big ones? Are you cautiously optimistic, or expecting the worst?