When the economy took a hit in 2008, it impacted me and Nathan in a very negative way. We were living paycheck to paycheck, with no savings and no plans if something went wrong financially. And everything went wrong financially for us. Luckily we were able to work our way out of the situation, pay off debt and save an emergency fund. So while 2020 was still a hard year, it did not cause us financial distress.
With the start of 2021 many people are worried about there being a recession. A recession is anytime the economy stops growing and continues to shrink for six months or more. With so many businesses closing and people out of work, fears of a recession are real. If there is a recession coming, how do you prepare for it? You need to make sure that your personal finances are in order and ready to weather a storm.
If you have debt...if you are out of work, or that’s a real possibility, you want to pause paying off any additional debt. You want to save all the money you can so that you can maintain your 4 walls. If your job is steady, then continue working your debt snowball and making progress towards becoming debt free. No matter where you’re at...don’t take on more debt.
If you’re saving...keep saving! An emergency fund is always a good thing. Your emergency fund is your buffer between you and life happening. You will always need to have an emergency fund. Make sure you’re staying on budget and that you’re saving the most that you can.
If you’re investing...hold on, take a deep breath, and don’t do anything out of fear. Investing is a roller-coaster ride and you don’t want to hop out while it’s still moving. Stocks rise and fall all the time, ride it out. If you continue investing, you’re purchasing at low prices, so when the market picks back up, you’ll be so happy you stayed in for the ride.