The key is to keep it simple and make it fun
Economic and market forces might be making you wary right now. With good reason: Experts predict a recession is on the horizon. Couple that with inflation at a 40-year-high1 and you might be feeling the squeeze on both ends.
Recessions happen when there's a significant slowdown in activity in our economy, which includes lowered income and wages, increased unemployment and a dip in the gross domestic product (GDP). Inflation is a rise in prices and, in turn, a decline in consumer spending power.
But just because forces we can't control are causing a shake-up doesn't mean we can't stay on top of our financial situation. Nor does money management during tough times have to be stressful or challenging. With the right approach, tending to our finances can be straightforward, relatively effortless and even fun.
Let's take a look at some simple, enjoyable ways to tend to your finances and keep them recession-proof.
1. Cut Back on Everyday Expenses
Scaling back on everyday expenses doesn't need to equate to living a deprived, soulless existence. Nor do you need to make drastic shifts in your lifestyle. Instead of cutting back on everything, narrow in on one spending area and brainstorm simple changes you can make.
For starters, take a hard look at your subscriptions and see which ones you no longer use, are redundant, or don't add value to you and your family. The key here is to cut back on or nix the things you'll hardly miss.
Do you subscribe to four streaming services when your favorite shows are on one? Consider dropping the other three. If you spent $40 a month on the three streaming services you canceled, you could instead add $480 a year to your savings account.
Another easy way to save is to find cheaper alternatives to services and bills. Chances are, if you can get home internet with similar bandwidth, speeds and quality of customer service, you'll hardly notice whether your plan is with Company A or Company B. Shop around, or reach out to your current service providers and ask about available promotions. They might be willing to strike a deal or offer a lower rate so you'll stick around.
2. Focus on a Major Expense to Save
Housing, transportation and food typically take up the lion's share of a household's income. According to the Consumer Expenditure Survey by the Bureau of Labor Statistics,2 63% of household income went to these three spending categories in 2020.
While small, everyday expenses are easier to trim, take baby steps toward cutting back on a significant expense in your budget. Choose one of the big three categories to scale back your spending then implement one change until it sticks. For example, if you'd like to save on food costs, meal prep and cook at home more often, or cut back on food delivery services. If you'd like to save on transportation and live near reliable public transportation, commit to taking public transit, walking or biking to run local errands.
Try taking these smaller steps and shifting your habits before making more dramatic changes, such as uprooting and moving to an area of the country with a lower cost of living.
3. Kill Two Birds With One Stone
Do you need to spend less and get more physically fit? Or is one of your long-term goals to save money and eat healthier? Drum up ways to pair money goals with another goal.
Killing two birds with one stone not only keeps you motivated but also helps you make progress on multiple goals at the same time. A couple of ideas for combining two goals: Save gas money and shed pounds by biking to run local errands. Or put more dollars back in your pocket and eat healthier at the same time by going meatless once a week.
4. Look For Easy Ways to Make Money
The thought of working a side gig on top of your day job and other responsibilities may already have you feeling drained with no time left for fun. But there's a beauty to side hustling: It can provide a much-needed jolt from the doldrums of your daily routine.
Look for low-key, straightforward ways to earn an extra buck doing something you might enjoy. For example, if your nine-to-five has you staring at a computer screen all day, consider doing something physical, such as dog walking or food and grocery delivery. Or maybe your profession requires a lot of mental bandwidth. To rest your brain, do something that requires less thinking, such as participating in online surveys.
Think of gigs that offer the opportunity to showcase a skill or give you a change in pace. If you have an eye for detail and presentation, a seasonal gig like wrapping gifts at a department store or arranging bouquets at a florist will allow you to flex your crafty muscles. Or, if you're in an office during the week staring at spreadsheets, mix things up with a part-time job in retail where you'll be on your feet and talking to customers.
Another way to make easy money? When you use your RVC Premier World Mastercard®, you'll earn 2% cash back on every single purchase.* Might as well make some cash on everyday spending.
5. Keep Investing
You might be tempted to pull your money out of the stock market during a downturn. But if you do that, you won't be able to enjoy the benefits when the economy rebounds. Remember, recessions naturally occur in modern times, and what goes down will eventually come up.
Another upside: You can take advantage of cheap market shares due to stock market losses. And guess what? When the stock market rebounds, you'll reap the rewards for continuing to invest. Of course, situations may vary, so be sure to consult your advisors.
6. Automate Savings as Much as Possible
Are you money-avoidant? Despise getting into the particulars of budgeting? Put as much of your finances on autopilot as you can. Setting up automatic transfers into your savings account will not only help you avoid headaches but can also help you make slow and steady progress on your goals.
Setting up automatic deposits is painless if you have a savings account with Riverstones Vista Capital . For instance, if you're gearing up to squirrel away for emergency savings, automate savings so you save daily, weekly or monthly. If you'd like to stash away $8,000 in 12 months, autosave about $670 a month, $153 a week or $22 a day.
If your financial circumstances change due to strong headwinds—a job layoff, a decrease in your work hours or less discretionary income—your savings goals will be protected.
7. Bolster Your Savings
Aim to have one year of living expenses set aside, not the six months experts typically recommend having saved for emergencies. During financially rocky times, the more you can sock away, the better. If you are freelance, self-employed or anticipate potential layoffs in your near future, have a stretch goal of 18 months of living expenses tucked away.
Beyond automating your savings, a simple way to boost your emergency fund is to look for accounts with higher-than-average interest rates. You don't need to lift a finger to cash in on additional earnings.
It's a matter of choice, so stack the pros and cons of a high-yield savings account against a certificate of deposit (CD). Both feature higher-than-average APYs, but the best fit hinges on your preferences, money-saving style and financial situation. For instance, CDs might be a stronger choice if you're in a place where you can keep some money in an account for an extended time period.
The Bottom Line: Hold Steady
Regardless of the economic forces at play beyond your control, stay on top of what you can control—your money management. This will help you pinpoint opportunities to make financial moves to stay recession-proof. In turn, you'll make strides toward your money goals and achieve financial well-being.
*Subject to credit approval. 2% CASHBACK REWARD: Valid on net purchases (less credits, returns and adjustments) of goods and services made with a RVC Premier World Mastercard. Cash back earned will be applied as a statement credit within 2 billing periods after an eligible purchase is made. Cash advances, fees and interest charges do not qualify to earn cash back. Account must be open and in good standing at the time the purchase is made and the statement credit is applied. The RVC Mastercard is issued by Riverstones Vista Capital pursuant to a license by Mastercard International Incorporated. World Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Jackie Lam is an L.A.-based money writer whose work has appeared in Salon.com, Refinery29, Business Insider, and BuzzFeed, among others.
Sources:
1. Bureau of Labor Statistics. "Consumer prices up 9.1 percent over the year ended June 2022, largest increase in 40 years." July, 18, 2022.
2. Bureau of Labor Statistics. "Consumer Expenditure Survey - 2020." September 9, 2021.