How to Prepare Yourself from an Economic Nosedive

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With the recent skyrocketing oil and gas prices, inflation, interest rate hikes, and the pandemic, many experts believe that an economic recession is looming in the future. Whether it is true or not, an economic recession would make anyone feel nervous. Since we cannot exactly predict the future, it is best that we fortify our finances and prepare ourselves in case of an economic nosedive.

Build an Emergency Fund

Conventional wisdom dictates that you should have at least six months’ worth of essential expenses saved as an emergency fund. However, it is best to save more. Since not everyone is capable of saving a large amount of money in a short time, it is better to focus on building a habit of saving a small portion of your income each month. Gradually saving and building your emergency fund is already a huge victory that will lead to your goal.

Pay Your Debts

You don’t want your debts bearing down on you in the event of a recession. Pay off your debts as quickly as you can. For instance, pay off your mortgage as quickly as possible. Pay your debt on time and make sure you pay them off without using your emergency fund. Of course, don’t get another debt without completely paying off the old one.

Change Your Lifestyle

Indeed, it is hard to save because of the inflation causing the prices to dramatically rise. Rather than worrying about the prices, it’s best to consider cutting back on things or activities you don’t really need. After the pandemic, you should have noticed that there are things you can live without. If you cut back on your unnecessary expenses, then you are optimising your finances.

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