Though we are not currently in a recession, fears about an impending economic downturn have many Americans reassessing their finances and budget. As financial stress and gas prices rise, there are a few things you can do to prepare your finances and be ready for any potential recession in the future, as well as improve your current financial situation. While we can’t fully predict when a recession will hit, it’s never a bad time to get your finances in order.
Reassess Your Budget
It’s essential to check in with your finances and understand how much money you have and where it’s going. When auditing your finances, ask yourself these questions:
- How much cash do I have on hand?
- What debts do I have?
- What are my basic monthly living expenses?
- What major expenses do I have, like surgeries, weddings, etc?
- How much savings do I have?
- How much do I need to save to cover 3-6 months of expenses?
Add your daily expenses, subscriptions, and other aspects of your budget to understand your essentials and extras clearly. This will also help to have a clear picture of your budget and how you can make cuts or changes in the future.
Build Your Emergency Cash Fund
Once you have calculated your essentials and extras, it’s time to focus on building your emergency fund. In case of job loss or other emergencies, saving 3-6 months of your monthly bills will help you prepare for an impending recession or any other financial struggles. While it is never ideal for tapping into your emergency fund, if the need arises, just set a goal to replenish the money as soon as possible. It is there for emergencies and as a way to prevent second mortgages and withdrawal from your retirement account.
Prioritize Debt Repayment
If job loss or another financial emergency occurs, it’s essential to understand your debts clearly. Should a challenging money situation occur, there might be some credit cards or student loans that have to be pushed back. This will directly impact credit, and there can be some hefty fees, so be sure to check in with policies pertaining to your debts.
When it comes to priorities, we suggest focusing on the essentials:
- Make sure your rent or mortgage can be paid on time and in full.
- If you drive to work, prioritize your car payment.
- Try to make minimum payments on your credit cards if possible.
- Focus on health insurance payments.
If you might fall behind, be sure to stay in contact with your creditors. In some circumstances, they can provide payment extensions and other support for these situations. You can also consider bankruptcy if you have too much debt to handle. Bankruptcy is not typically the first option, but if you need to file or have questions about how bankruptcy can help your financial situation, please call our office to speak with an attorney. We understand how tough this decision can be and have the resources and information you can use to make the best decision for your case.
While we don’t know for certain if a recession is imminent, we hope this guide gives you some essential information to empower your current financial situation and prepare for any emergencies that might come in the future.
If you live in Western Massachusetts or Northern Connecticut and are in need of a Bankruptcy Lawyer, contact The Law Offices of David Brunelle. We will make the bankruptcy process easy and stress-free for you. Contact us today by calling 413-539-5959 or email Attorney Brunelle at firstname.lastname@example.org.