How You Can Prepare For The Next Recession (Even On A Low Income)

prepare for a recession - stock marketing downLife happens. And sometimes, our governments, businesses, and people aren’t truly ready for those life events. Because of that, we find ourselves in a dreaded recession. While we haven’t really had a recession since 2008, one is bound to happen (it’s a matter of when not if). So, how do you prepare for a recession, even if you have a low income?

Have An Emergency Fund

It’s no secret that an emergency fund is important. And yet, more than 61% of Americans live paycheck to paycheck and can’t afford a $100 emergency. This is sad, but it doesn’t have to be a reality for everyone.

The best way to build an emergency fund is to start right now and save money wherever you can. Even $2 a week is better than nothing at all. Have a savings challenge, save money each paycheck, or put away some tax money for a rainy day.

I know that it’s hard to do this on a low income when you feel like bills are more important, but it can be done. Even when I was making less than $30,000 a year and trying to support a family, I had an emergency fund, and it was so helpful when Murphy’s law hit us (multiple times!). It would suck to have to dip into it, but it was better than getting into debt.

Pay Off Debts

Do you want to know one of the biggest reasons people suffer during a recession? Because they have debt and no way to pay it. Job losses, cutbacks, and needing to feed a family can really affect the amount of money you can throw towards debt if a recession hits.

So, prepare now and start paying off your debts. Again, every little bit helps. I’m not saying you have to pay off $100,000 or more in a year, but working on your debt payoff would be worth it if you find yourself without a job. While saving money is important as you prepare for a recession, so is limiting your liability.

For example, my family is debt-free, and we can survive on less than $2,000 a month (that’s including insurance, life insurance, rent, etc). However, when we had debt, we were paying over $3,500 a month just to pay it off. That’s a $1,500 difference every single month! Imagine not having to worry about paying off a bunch of debt while searching for a new job and trying to pay your bills.

Related: How the Debt Snowball Really Works (with a Free Debt Snowball Calculator Tool!)

prepare for a recession - signStart Multiple Streams Of Income

Having multiple streams of income is no longer a luxury. It’s a necessity. There are many people, even people you think are well off, that have multiple streams of income. And there’s a good reason for that.

Let’s say you’ve worked at your job for the last 20 years. You love your job and don’t think you need a side hustle or other stream of income.

  • You make $3,000 a month with your job.
  • But…you lose your job.
  • What do you do?
  • You lose your entire income and have to look for a job, file for unemployment, and hope you can pay your bills on time.

Now, let’s say you’ve worked at your job for the last 20 years, and you love your job, but you also have two side hustles that bring in about $1,500 a month.

  • You make $3,000 a month with your job.
  • But…you lose your job.
  • Guess what? You’re still making $1,500 a month with your side hustles. And you can potentially ramp those up to make even more while you search for a new job.
  • And, that $1,500 a month in side hustles keeps you from having to file for unemployment and helps you pay your bills until you find something.

There are so many side hustles you can do. Even if you think you don’t have the time for them, you do. I work full-time and I’m the sole income earner for my family of 3, and I still have 3-4 side hustles that I do on the side, just in case. These typically take me less than a few hours a week, but bring in an extra $1,000 or more every single month!

Related: 36 Side Hustles You Can Start Now to Earn More Money

Invest Regularly

I know, I know, the last thing people are worried about during a recession is investing. I mean, come on, how are we supposed to have money to live AND invest? But hear me out. The best time to invest is all the time. Even if everyone else is losing their mind.

Want to know why?

The market always rebounds (at least, it always has in the past, and there’s no reason to think it won’t in the future!). And, you want to make sure you’re still saving for your future. Because you never know, you may have to prepare for a recession more than once in your lifetime. However, by investing, you make sure that your future self at least has a fighting chance to survive should a recession hit during their retirement. And again, just like with all of the other ways to prepare, you don’t have to spend a fortune to do this. $5 a paycheck is better than nothing at all.

dollar bill under waterDon’t Be Afraid

Recessions happen. It’s a part of life. But, if you prepare for a recession right now, you’ll be better off than the people who are scrambling at the last minute trying to figure things out. And freaking out doesn’t really help anyone in the long run.

So instead, prepare, but don’t be afraid. Just like everyone before you made it through, you can too.

How To Prepare For A Recession

Let’s be honest, recessions suck. However, we are way stronger than a recession. And by preparing, you’re ensuring that you’ll be better off should anything happen. It will take time, and a little sacrifice, but your future self will thank you.

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AUTHOR Kimberly Studdard

Kim Studdard is a strategy consultant, product launch expert, and mastermind behind the www.theentrepremomer.com. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.

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