A recession is probably in our near future. Well, let’s be honest, the cost of living is higher, people are starting to get laid off and while there appears to be jobs available – how long will that last?
As if we haven’t had enough with the pandemic nightmare. Now, we have to worry more about the cost of living, possibly getting downsized, and struggling to find another job. However, recessions are common and happen every few years. They suck. Let’s start with what a recession actually is.
What is a recession?
The National Bureau of Economic Research (NBER) defines a recession as a significant decline lasting more than a few months and affecting the broader economy. In other words, almost every industry will experience its impact. That means it will affect everyone, some more than others, depending on how prepared you are for it.
How to recession proof
Making it through a recession can be less painful. You don’t have to live pay-check-to-pay-check. And wouldn’t it be wonderful to achieve financial freedom? You can accomplish this by learning to live below your means.
Getting to the place where your income exceeds your spending is beyond words. It is such a wonderful feeling not to stress expenses, get out of debt, and build wealth for the future. Whether you are in your 20s or 50s, building a safety net for emergencies, unexpected expenses, buying large purchases, or preparing for retirement, having the ability to place more money toward the future should be the goal for all of us.
Live below your means
Learn to live below your means. The phrase might seem obvious to many people, but there are misconceptions about living below your means. Living below your means does not mean you never spend money on things you enjoy or have a good time. It also does not mean that you must live as if you were poor or act miserly when it comes to your money. However, there are three key areas you can look at:
Your emergency fund cannot cover at least 3 months of expenses
You are not putting aside any money consistently each paycheck for your emergency fund
You actually do not have a savings account
Put simply, living below your means is nothing more than not outspending what you earn. In essence, that is really all there is to it.
Eliminate the stress that comes with unplanned expenses
Whether you suddenly need a new car, or you need a repair in your home or even if you lost your job things happen that are unexpected. One of the immediate benefits of living below your means is eliminating the stress that comes with unplanned finances.
Know all your bills
Knowing how much you need for ALL your bills is the first step. I say this as I will bet there are some expenses you haven’t thought about. Whether it’s a music app, a platform for your website, or insurance on your cellphone, there are probably monthly or yearly charges you forget about. Making sure you have fewer unexpected expenses is a significant step toward living below your means.
Lower living expenses
Have you considered downsizing your living expenses? Specifically, do you really need the size of the house you are currently living in? My husband and I are currently test-driving this theory. We aren’t going as far as the Tiny House Movement, but we are getting ready to move to a townhouse half the size of our house.
Consider a house half of what we are currently in also means lower rent, less gas, and electricity to heat and cool the home. Overall, our living expenses will be cut in half. Renting isn’t the only game plan. Of course, you could go the tiny house route. Further, you could rent out rooms in your house. You could set yourself up to have your renters pay your mortgage and possibly utilities.
Downsize your car
Another option is to give up your expensive car for a more durable and cheaper car. You want to make sure that you consider the other costs of owning a car. This includes gas and car repair expenses. Some couples downsize to one car, while other people go extreme and give up their vehicle altogether. Let’s be honest; this isn’t everyone’s option but depending on where you live, it’s an option.
Downsize your food budget
This applies to both your grocery and out-to-eat budget.
Going out to eat has gotten pretty expensive. It is pretty easy to spend $100/ more for a couple to eat out. Think about spending less and going out less often when you go out. Maybe go out for drinks and an appetizer, share a meal or go out much less often.
You can opt to buy once a week or a month so you can save more when you buy in bulk. Not only that, but you also get to save on transportation costs. You also have to opt for generic brands in most of the products you use at home. In most cases, they end up giving you the same quality. You can also downsize by planting in your garden – at least if you have one. Even the most basic herbs and spices can save you some cash.
Downsize that debt
Lastly, you want to consider how you can downsize your debt financially. Your debt payments, especially the interest rate, are eating up your limited resources. You want to ensure you will keep your credit card spending down. Considering your pursuit of downsizing, you need to keep your debts down. If you can manage it, save yourself debt free.
To financially downsize may be tough but under the right conditions, it can be your saving grace. Try to think it through and identify the things in your life that you can cut back on. While downsizing seems extreme, you will be glad that you did.
If you want to check out ways to make additional income, check out my article on Best Online Side Gigs.
If you want to travel but looking for ways to save on your next vacation, check out the article on Avoid Flying and Hit the Road.