In 2008, many realized that if you live beyond your means, you are destined to live beneath your means. After years of living off of borrowed money, artificially low interest rates and phony wealth, the consumers started to tighten their belts; paid down debt and rebuilt the savings.
Although many argue that we are still living in the Great Recession from four years ago, we should still prepare for either a new recession in the future or a double-dip recession – heck, even a debt or dollar crisis.
How can one prepare for a recession? There are various ways one can because with every crisis comes an opportunity. Here are tips to prepare for a recession and avoid the struggle that so many Americans, Canadians and the rest of the world went through.
The rule of thumb is to generally save between 10 and 15 percent of your income. This is a relatively easy first step as long as you budget and stick to a habit of putting away any generated money. Having a rainy day fund doesn’t just have to be a low-interest savings account, but rather a mutual fund, a tax-free, high-interest savings account, commodities and foreign currency.
Living within your means is absolutely crucial, which is why a budget is just as important. Knowing how much you make each month, what you have to put your money towards and how much cash is left over at the end of the 30-day period is an important step to prevent fiscal troubles.
If you’re listening to the likes of Peter Schiff and Jim Rogers and they’re warning of financial doom, it’s a good time to start thinking about getting a part-time job or anything that can garner extra income. There is plenty of work out there that offer three-hour days or a couple of days per week and are not as physically demanding.
Getting rid of your debt should be done immediately. Maintaining a debt level is superfluous and can hinder any chance of personal economic growth. Although the central banks of the world like to have low interest rates, they are going to rise inevitably. It’s best to have zero debt when that time comes.
The word cut seems like a sacrilegious term, especially in Ottawa or Washington. Unfortunately, many households have to cut costs if the money is not there to pay for it. This is an imperative task any individual should do each quarter. Can you reduce your costs in your grocery budget? Do you have to go to the movie theatre twice a month? Are you even using that gym membership?