We’re starting to feel the effects of 2022 and past years of the pandemic. 2023 is the beginning of hard times and if you’re reading this, you are too like me trying to think of ways to prepare your finances for an upcoming recession or downtown.
Even now, there are more than 100k+ jobs more specifically in the tech industry already affect by layoffs, but even more so, we’re starting to hear other sectors being hit like education and teachers.
Preparing for a recession involves creating a budget, eliminating debt, building an emergency fund, and cutting down on expenses. Creating a budget can be accomplished in seven simple steps, while eliminating debt can be done through a debt snowball or consolidating debt into a fixed-rate loan. Building an emergency fund is important, as job losses are common during a recession. Cutting down on expenses can be done by shopping for less expensive services, canceling recurring subscriptions, rethinking big purchases, and learning to cook at home. With these steps, households can be better prepared to weather a recession.
So to start this new year, you can:
1) Beginning by cutting unnecessary expenses like steaming or subscription services. For needed services like internet or cell phone plans, try to see if you can switch to a cheaper plan that might require you to reduce data consumption.
2) Reduce spending as much as you can. Get only the essentials like groceries.
Then with the extra cash you currently have after bills, try to:
3) Start paying off your highest debt, in most cases, that will be credit cards.
4) Tuck the rest of your excess cash into a high interest savings account. Since interest rates are higher due to Jerome Powell and the FED, you’re beginning to see interest rates returns around 3-4% for higher performance savings accounts.