6 Things Captain America Knows about Preparing for a Recession
Before Steve Rogers became Captain America, he knew a few things about financial difficulty. He was the son of Irish immigrants. His father died while he was only a child, and during his teen years, Rogers’ mother died. And, of course, Rogers, born in 1917, lived through the Great Depression before he participated in the experiment that resulted in his “rebirth” as the super-soldier known as Captain America.
Steve Rogers is probably no stranger to savvy finances. And, with talk of another recession coming up, it might be wise to prepare your finances right now. While you don’t want to give into the stock market panic that seems to surface every other week, it doesn’t hurt to be prepared for the possibility of another economic downturn. Even if another recession doesn’t materialize in the next few months, getting your finances in order is always a good idea:
1. Reduce Your Spending
The #1 rule of finances — and it bears repeating over and over again — is to live within your means. You need to earn more than you spend, doing your best to avoid racking up the debt. During World War II, people knew the meaning of cutting back, and re-using items. It was a time of frugality in personal finances and in society as a whole.
If you want to be ready for whatever comes next, you need to evaluate your spending. Are you spending money on unnecessary items? Yes, it’s enjoyable to spend on “fun.” However, you should prioritize so that you aren’t spending on items that you don’t really care for. Reduce your spending so that you focus on the things that are most important to you, and be ready with a list of “wants” that you can cut from your budget if things suddenly turn worse.
2. Reduce Your Debt
The #2 rule of stable finances is to reduce your debt. When you go into a recession, the last things you need are high interest obligations. Now is the time to reduce your debt. Put together a plan to pay off debt as quickly as you can. If a recession comes, and brings with it financial difficulty, messed up finances can be a real hindrance. The fewer obligations you have, the better off you’ll be.
3. Build Up Your Savings and Emergency Fund
Your credit card shouldn’t be your emergency fund. Instead, you need to be building up a real emergency fund. Your goal for an emergency fund should be at least three to six months of expenses. Even more, nine to 12 months, is even better. Even though we are no longer in a recession (at least technically), many people have been out of work for more than a year. If we see another recession like that, or even a Great Depression redux, the bigger your financial safety net, the better.
Make sure that your emergency fund is accessible and liquid, so that you can get access to your money relatively quickly if you need it.
4. Prioritize Your Bills
No one likes to think that they will be skipping out bills. However, if you find yourself caught in a bad position during a recession, you might have to make an unpleasant decision about which bills to pay — and which to let slide. Know now which bills have to be paid.
One rule to consider is that secured obligations should be paid first. So, if you have a home loan, and you want to keep your house, you should make sure that you are making your mortgage payments. If you need your car to get to work, or to the store, and public transportation isn’t a viable options for you, you want to make sure that your car loan is paid so that it isn’t repossessed. When it comes right down to it, unsecured debt, like credit cards, can be skipped so that you can make your mortgage payment. However, you will pay a hefty price in terms of your credit rating. (This is one reason it’s a good idea to avoid debt.)
5. Cultivate Income Diversity
Relying on your “day job” is quick way to find yourself in trouble during a recession. What happens if you are laid off? Instead of relying too much on a single source of income, cultivate income diversity. Look for ways to bring in income from different sources. This can include encourage your spouse to get a part-time job, starting a side hustle on the evenings and weekends, or even building an income portfolio.
Cultivating diverse income streams takes time, though. You can’t get substantial income from these streams overnight; you should start now to start building them up. Even if you never make enough on the side to replace your day job, just having that extra income can take some of the pressure off your emergency fund, and help you pay at least some of your bills.
6. Be Ready with Other Items
While you don’t need a stockpile to rival those on Extreme Couponing, it can help to have a few things stored up, just in case. Food storage of around three months is usually doable, and it will help you in the event of a zombie apocalypse, as well as in the event of a recession. When you have a little extra food stored up, it can reduce your grocery bill during tough economic times.
The same is true of extra personal care items and paper products. Your home doesn’t need to be taken over by your storage, but you can be ready to alleviate some of your costs during a recession.
Image source: randychiu via Wikimedia Commons