More than once, we’ve been faced with a “once-in-a-lifetime” economic crisis. Coming out of the 2008 recession, our economy began to recover, and we regained a sense of normalcy and comfort. Fast forward to the novel coronavirus 12 years later, and we are in the midst of another significant setback.
We don’t want to always be worried about the next economic backslide. But, on the other hand, wouldn’t it have been great to feel a little more prepared for this one? While we’re always hoping for the best, preparing for the worst can put us in an ideal position for any financial setbacks we may face in the future—in the economy, our careers, or our personal lives.
To help you prepare yourself for anything life throws your way, here are seven steps that will strengthen your financial standing.
1. Build your emergency fund.
Also referred to as a rainy-day fund, your emergency fund is there to provide you with a safety net. It’s commonly recommended to save between three and six months worth of expenses. This savings ensures that you have what you need to pay your bills without going into debt if you were to suddenly lose your income. More than anything, an emergency fund can provide you with the confidence that you’re taken care of—no matter what happens.
2. Analyze your spending and budget.
Even if you aren’t a big spender, there are likely areas of your budget that could use some attention. Try tracking your spending—either manually or with an app—to see where your money is going. You’ll notice subscriptions that you no longer use, bills that you didn’t realize were that expensive, and debt payments that you would rather not make. Analyzing your spending and readjusting your budget will put you a step closer to understanding your next steps and helping to reach your financial goals.
3. Pay off your debt.
One of the most powerful ways to prepare for potential financial downturns is to follow debt-free principles. Paying down debt gives you fewer bills to pay, less money lost on monthly interest payments, and less financial worry. With the money you aren’t spending on debt, you can bolster your retirement savings, emergency fund, or use it to reach other savings goals.
4. Continue to invest.
Though your strategy will change depending on the market’s state, continue to invest. When the market is down, your nerves may tell you that it isn’t time to spend on investments; however, it may be a great time to buy when prices are low. Consult your advisor to determine your best investment strategy.
5. Consult your advisor.
No matter your stage of life or your situation, your advisor can assess areas of your financial portfolio that may need attention. This way, you can set yourself for financial independence and confidence. And, if you do find yourself in difficult times, you will have the tools in your arsenal to help meet and possibly exceed your financial goals.
Did you feel unprepared for the market’s decline? Contact us today to create a proactive financial plan for you and your family.
