There are many habits and steps an average person can implement to protect themselves from the sting of a recession. In fact, following certain tips can help make sure that one does not feel the effects of recession at all. Kavan Choksi Singapore says that following the appropriate strategies for managing money during a recession can help ensure the financial stability and security of a person.
Kavan Choksi Singapore discusses ways to manage money during a recession
A recession implies to a period of economic decline. It ideally is defined as two consecutive quarters of negative GDP growth. Recessions may have quite a considerable impact on both individuals and families, often leading to difficulty in paying bills, reduced income and job losses. While it is next to impossible to predict for certain when a recession will occur, there are a few steps one may take to prepare financially in case one does happen. Here are some of those steps:
- Assess the financial starting point: One cannot actually plan their finances till they have a good understanding of what their finances are. People must take a good look at any accounts they have along with the available funds. Apart from going through the checking account, savings and retirement funds, one must make a list of their varied sources of debt. Determining how much funds and debts one has would be a good starting point. For instance, if a person has a low income but also a good deal of debt that has to be paid off, common savings goals like a year’s salary by 30 might be unrealistic.
- Organize bills and due dates: People must list out each of their monthly expenses, along with their due date, to make sure they are paid on time. If possible one can set up automatic payment withdrawals for these bills.
- Track monthly cash flow: One should determine their monthly budget and tally up the monthly post-tax income, including any side hustles or passive income. It would be prudent to check how much money has been spent over the last month, and deduct it from the monthly post-tax income to see the monthly cash flow. Understanding where one’s money is going and how much one has left over can help gauge the financial strengths and weaknesses.
- Consider where to cut down on spending: People need to identify things that are important to them, as well as what they are spending money on that is not a necessity. For instance, if one is a movie buff, they should consider availing a streaming service to be a higher priority than frequently buying new clothes.
- Set up a realistic budget: Many people believe that they would be able to aggressively save and cut out discretionary spending entirely when planning the budget. However, implementing this plan is not at all easy. Hence, it is better to keep a realistic budget. Following the 50/30/20 budget template can be a good idea, even though it may not work for every financial situation.
As Kavan Choksi Singapore says, as a person starts to save for short-term goals to manage recession risks, they must try to begin with small, accessible goals that can be met in around six months to five years.
