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Protecting Your Finances in Times of Crisis

Recession: 9 steps to protect your finances against recession in ...

If you haven’t thought about it before, there’s no time like the present to consider how to protect your finances during times of crisis. If you’ve just been going along living in the moment and trusting that everything is going to be fine, you’re not alone. Many Americans don’t realize they’ve made investments with the underlying assumption that things will stay more or less the same. Here are some things to think about to ensure your financial wellbeing, no matter what the circumstances.

Take a Deep Breath

First and foremost, don’t do anything rashly because of stress and anxiety of what the future may hold. When you’re going through a difficult time, whether personal or global, it’s easy to feel overwhelmed because of the unknown. The worst thing you can do, though, is to make decisions too quickly and in a state of panic. Breathe deep, and take a good look at what your options are.

Make and Revise Financial Plans

This might seem obvious, but many people don’t make a solid plan when deciding how to allocate their money. Planning is key, both for allocating your resources, as well as for weathering storms. In particular, using modeling to actually simulate different possibilities is hugely helpful for ensuring that your plan is versatile and can stay strong in various scenarios.

As your making your plans, one of the best ways to ensure that you can ride the tides of economic uncertainty is by diversifying your portfolio. The more diverse, the more likely that not all of your assets will be negatively affected at the same time. This comes after having some savings, which are more liquid, as well as a retirement fund.

Retirement Funds

If you already have a retirement fund, experts advise that you try your best not to dip into it during times of crisis. During the recession of 2008, it was found that people who did not withdraw from their retirement accounts and, instead, kept adding to them took less time to get back to normal again despite their lower earnings. Borrowing from your 401(k) is never a good idea unless absolutely necessary.

Financial Planning Assistance

Whether or not you need help with financial planning will depend partially on where you are in your career and life. If you are just starting out, with a limited savings potential, then you may not need assistance, or the free resources that you can find online might be enough. Once you start getting serious about creating a stable future for you and your family, it’s best to get some professional guidance. Financial planning experts like Richard Isava can offer advice at both a corporate and banking level as well.

What About Times of Recession?

If you’re not out of work, then you’re one of the lucky ones. You can continue to save and pay your bills just as you normally would. If you’re out of work, then you have to think about putting food on the table first and foremost. In this case, you’ll want to make minimum payments on your accounts if you can, but it’s not the time to put out more than you have to. Instead of paying anything extra on your debt, put it into a savings account so it’s more readily available if you need it, at least until you have a better idea of how things are going to play out.

If you do you have money invested right now, keep it in there if possible. With the stock market plummeting, it’s not the time to sell. If you can afford it, it’s actually a great time to buy while prices are so low. But this is only if you really do have expendable income at the moment. Otherwise, hold off on extra spending or investment until you are in a more stable position.

Long-term Goals

Many people have difficulty thinking in terms of long-term goals, especially those without a lot of breathing room between income and expenses. When it seems like there’s no way you can save any appreciable amount of income, it’s easy to get in a habit of being frivolous with money and spending whatever you make. But when the economy is in a downturn, this is the time you really need to stop and take a look at what expenses you can cut back on. In particular, be wary of committing to fixed expenses like rents that take up a large portion of your monthly income.

Above all, try to keep a positive attitude so that you can make smart decisions about your finances. Even in times of trouble, there are usually a few things that you can find to be grateful about, as simple as they may be, and that alone can often help to get you in the right frame of mind to be proactive.

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