The economic situation we’re currently dealing with put a large portion of the American workforce in a less than favorable position, and the middle class took one of the biggest hits.
As things progressively get worse, many experts believe we’ll soon be entering a recession, which is the culmination of a years-long high-inflation climate.
It’s defined as a period when all economic activity slows down for a period that is longer than just a few months, and it’s characterized by growing unemployment rates, less spending, and a sharp decline in production.
As bad as it sounds, it’s only one of the natural processes every economy goes through sooner or later, and while a stronger economy will manage to fend off a recession for much longer, a weak economy is particularly susceptible to it, and can even remain in a recessive state for longer periods of time.
Handling your finances in a recession
If you’ve already been low-income, entering a recession can be disastrous, as you’re highly likely to be left without employment at this stage, and that alone is enough to put someone to their wits’ end.
This is exactly why knowing how and when to prepare for these things is crucial, and if you’ve done your part, you may be able to rest easy knowing everything that could be done, was done to help you live comfortably in the face of recession.
To begin, you must first have a solid grasp of your current financial situation, as it’s the best way to start, considering you can’t exactly make decisions without knowing what you’re working with.
Next up would be creating an emergency fund, which you’ll be able to rely on for extended periods of time if you do lose your employment, and with it, your income as well.
Finally, you may want to look for some extra sources of income, as you never know what the future may bring, and if you’re able to work two jobs, you’ll be able to save up much faster than you would with only one.
Understand your finances
By establishing an understanding of all your financial assets, you’ll be able to gauge the budget you’re working with as well as realize what it is you’re up against exactly.
The process is fairly simple when you actually look into it, and all you have to do is check your total income for every month for a longer period of time.
Once you’ve done this consistently, you will have created a general idea of how much money you’re working with every month, and this may as well be the key to all of your troubles.
Now that you know your total income, it’s time to get to cutting the expenses, and you’ll want to remove any expense that you deem not to be important, mainly due to the fact that there’ll be better times when you’ll be able to spend on those things.
Right now though, it’s time to focus on your future, and every penny you save could potentially mean tens of thousands of dollars later on down the line.
Even if it may sound impossible, Murphy’s law dictates that whenever something bad could happen, it most likely will happen, at the worst possible time even.
A recession is a pretty bad situation to be living in, and even if you’ve prepared for it for decades on end, contingencies can still pop up, and they’ll chew through your budget in seconds.
This is why emergency funds exist, as they’re able to help us get through tough times even when we’re at our lowest.
Experts recommend setting aside anywhere between 3 and 6 months’ worth of income, although you shouldn’t limit yourself to just that if you absolutely don’t have to.
This becomes even easier if you’ve got the overall picture of your financial situation, as you’ll know exactly how much you can set aside without having to dip into the fund every so often.
Additional sources of income
At times, a single job just won’t cut it, and if you really want to prepare for a full-scale recession, it may be for the best to start preparing for it as early as possible.
This is particularly true for low-income Americans, who may struggle to make ends meet at a time when jobs are scarce and money is practically impossible to come by.
You should always remember that the second employment you find should be something convenient for you, which wouldn’t overlap with your current job’s responsibilities.
Of course, the money you make from your second employment can also be used in the present, but it may be for the best to simply set it aside in a fund for your future.
On top of earning some extra money on the side, an additional source of income is also a way to obtain some additional education on a certain skill or matter, and with more knowledge, your value on the job market will also go up.
Dealing with a recession is hard, especially if you’re a low to middle-income American, but it’s not impossible, and that’s what we’ve tried to cover today.
There’s no one better to rely on than your own self, and if you’re diligent and dedicated enough to fulfill your goals, you may just be able to reach them despite a recession raging on through the US.