The Ultimate ways to Manage Your Money during a Recession
So I think it’s important with everything that’s going on right now for most middle-class families to understand exactly how to manage their money and when I say middle-class, I mean pretty much the 99%, so excluding all billionaires.
So this was a quick article and I hope it will be helpful to our readers. We’re going to be talking about how to properly manage your money during a recession.
We’re going to break down this post into three parts.
- The first is going to be what you need to do if your income is stable.
- The second part is going to talk about what you need to do if your income is unstable, or if you’ve been recently laid off.
- The third part is going to ask a few questions to see if claiming or filing for unemployment is for you.
So let’s get right into it.
1. If your Income is Stable
So the first way to manage your money during a recession if your income is stable is to stay the course. So the reason I say this is because so many people start to get emotional and irrational during a recession to where they start cashing out their retirement accounts and their 401ks.
If you already have a plan in place such as a budget or if you’re already paying yourself in different buckets, which I recommend, so like having a travel fund, house fund, an emergency fund savings fund, etc.
You need to stay the course and keep doing what you’re doing.
If you have a stable income then the second thing you should do is to stay current with bills. So you don’t want to be some of these people that are taking advantage of all these different programs that are not really designed to help you in the long run.
So, you know like pausing your mortgage payments and doing things like that. Just handle business as usual and stay current with your current bills.
The third thing you should do is if you qualify for that $1200 dollar stimulus check or if you’re even getting it at a reduced rate you need to use this and pay off debt or invest.
The fourth is don’t cash out your retirement. As I mentioned earlier, a lot of people panic when they see their 401K go down 20-30%, thinking it’s going to go down way more.
Obviously, there’s a chance of that happening but most people actually see those gains recouped as was as we’ve seen over the past couple of weeks.
Finally, the fifth thing you should do is pay your mortgage just stay current. Don’t take those deferral programs unless you have to because you’re still producing that stable income.
So let’s move on to if your income is not stable or if you’ve been laid off recently.
2. If your Income is NOT Stable
So number two is managing your money if your income is not stable during a recession. So unfortunately if you’ve been laid off or if you’re a server or a bartender or a salesperson and your income is just kind of all over the place right now. This is what you need to do and focus on.
The first thing you need to do is pay the minimum on all your obligations if possible. So focus on your necessities.
So, what do I mean by necessities? These are the things that you literally need to live such as food, utilities, house, and reliable transportation. That way you can get to work or job interviews.
The second thing you need to do is cut out unnecessary spending.
So my wife signed up for Hulu because she wanted to watch the Kardashians and I literally feel like I’m losing IQ points and brain cells the more that show is on but fast forward, you know, a couple of months later we don’t even use to Hulu so cut out stupid subscriptions that you don’t need because every little bit counts.
Then finally for this income-producing standpoint look for a part-time job, so I created a video an amazing blog post on this site where we teach you 18 Best Ways to Make Money Fast Online in 2020. So check out that article.
The last few things you need to do are:
- Don’t take out additional debt. So what do I mean by that? For example, your house is paid off. You don’t want to take out a HELOC or a home equity line of credit.
- You don’t want to take out a payday loan.
- You don’t want to take out a loan on your 401k if you don’t have to because you’re just digging yourself deeper in the hole.
- Leave your 401k alone. However, only if you’re facing like foreclosure or eviction if you’re literally getting kicked out of one of these necessities. So don’t touch the 401K unless you absolutely have to and don’t take out more unnecessary debt.
Finally, the third category. Let’s talk about if you should even file for unemployment to begin with.
3. Should you apply for Unemployment?
So the reason I included this section right now is that there’s a lot going on with the stimulus package and the cares act.
I’ve actually filed for unemployment in the past. I worked for a start-up company and the company was bought out by a publicly-traded company. I was 23 years old at the time. I said forget this, I’m going to Florida and I visited my friend while collecting my unemployment check. It was actually pretty awesome, but I was looking for work online because you have to verify that you’re looking for work.
So unemployment and what’s happening with the cares Act is that they’re actually are adding an additional $600 per week on top of what your state would give you anyway.
So typically unemployment checks are given every week and they range anywhere from like a $100 – $400 at least in the state that I live in, and it depends on the previous income that you can verify.
So if you’re making like 400 bucks a week from the unemployment check, plus the 600 from the government. I mean, that’s 1000 bucks a week, so there’s very little incentive to actually look for a part-time job or go back to work until at least this blows over.
So keep that in mind, it’s almost a no brainer to take it. But it could lead to bad habits, which is why the next point is to keep looking or develop skills.
So gaps in your resume look terrible. They look really bad for potential employers. You don’t want to have big gaps.