How to Save Money in a Recession

You don’t need an economics degree to realize that the United States economy is quickly approaching its next recession. The warning signs and economic indicators are everywhere. Some say the handwriting is already on the wall, but most people still refuse to see it. At this point, it’s no longer a matter of if, but when. And who’s to say how bad it will be this time around? The U.S. economy is struggling, but we’re all in this together to avoid struggling as much as possible!

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How to Save Money in a Recession

While there’s absolutely nothing you can do to stop the inevitable, you should still focus on saving money any way you can so that your family won’t have to suffer as much when it does strike. I’d like to share with you several ways that you can save money before and during an economic recession.

Create a Budget

For some of you, creating a budget might seem elementary and something you’ve been doing all along, while for others, sitting down and creating a budget is a completely foreign idea to you. Regardless of whichever category you fall into, a budget is a valuable tool that teaches what it costs to run your life. Fortunately, a budget is not some secret math formula that’s difficult to figure out.

All you need to know is what your monthly income is along with all of the expenses that you have for a single month. Once you’ve subtracted your expenses from your monthly income, that’s the remaining money that your family has to live on for the month. Knowing how much money you’re spending every month is VERY helpful!

The next step is to outline where the expenses are going and establish if you want to maintain those amounts as is, try to reduce or eliminate some as you can, and possibly allocate more funds where needed.

Try to Reduce Your Expenses

This one seems obvious, but it’s often overlooked. Take a look at your current expenses and try to find ways that you can reduce them. Do you have movie streaming services or cable subscriptions or gym memberships that you don’t use anymore? If that’s the case, you’re just throwing away hard-earned money and need to cancel them as quickly as you can.

Or perhaps you’re paying unnecessary amounts in areas like meals out or entertainment, your current cellphone, or an internet provider? Maybe it’s time to switch to a more reasonable company or at the very least, call and see if they can get your rates lowered. Most companies are willing to work with you because they don’t want to lose a valued customer. We all have essential expenses as part of our monthly living expenses, but we also have areas that need to be looked at and possibly eliminated.

Utilities are another area to evaluate. Can you set your thermostat lower in the winter and higher in the summer to cut down on heating and cooling costs? Do you try to turn those lights out when you leave the room? Would using electric blankets in bedrooms be more cost-effective than heating all the bedrooms each night?

Eliminate Your Debt

When interest rates start to climb as they’ve been doing based on actions by the Federal Reserve, so does the cost of those debts you owe. The more money that you have to put toward your credit cards and loan payments, the less you’re able to save for when you’ll really need it. If you’re in over your head in debt, I’d encourage you to listen to what financial coach Dave Ramsey has to say about it. He introduces the “debt snowball” method to help people get out of debt quicker, and it actually works.

Some of you may not be able to be completely debt-free before a recession hits. If that’s the case, you may want to look into a low-interest, fixed-rate offer. Consolidating your debt can help save you money due to a lower interest rate and extending the payment term. You have to be extremely careful about which company you go with because there are a lot of scams out there.

Some of you may have been affected by recent layoffs, even at large firms like Amazon, Facebook, and others. You may be able to get some concessions from your local banks, credit unions, and even national credit care firms based on your situation. There’s no harm in asking and they often would rather help you make ends meet than lose out on the total debt owed. In a time of economic uncertainty, we all need to be flexible.

Eat at Home More

Going out to eat is one of the biggest budget killers. It’s just been made too easy and convenient for us to drive through those easy-access drive-thrus. So when you feel like you don’t have enough time or energy to cook dinner, think about this. Eating out costs approximately two to three times more than cooking at home, depending on the types of foods you usually eat. That being said, eating in can be a great way for your family to save money during a recession.

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Reduce Your Energy Cost

You can reduce your energy cost by making a few small changes to your home. Try turning off lights, or unplugging appliances and devices when you’re not using them. Those TVs, laser printers, and laptops all use some power even when in sleep mode. Consider using LED lightbulbs, and keep the temperature at a reasonable level throughout the day. Sealing your windows and doors during both hot and cold weather really helps. During really cold weather you can hang blankets in the windows to help insulate. Also, during the sunny part of the day having blinds and curtains open can provide some natural heat for your home on cold days and save you on expenses in the long run.

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Set Up an Emergency Fund

It’s always important to have some money set aside for an emergency, but it’s even more pressing during an economic recession. Nobody knows how long a recession will last or what kind of dire straits you may find yourself in if it drags on. With this in mind, I’d suggest setting up an emergency fund and putting aside at least a few months of your salary in case you lose your job or face something like a car repair. This can relieve a lot of stress and hold you over until you’re able to find another job or find a new income source to sustain yourself and your family.

That fund should be maintained in liquid form like a high-yield or regular savings account, checking account, or even bonds that can be accessed and cashed easily. Having an emergency fund should be an important part of your overall financial goals. High inflation seems to be the norm right now, and economic activity over consecutive quarters is such that the Federal Reserve will continue to pursue ways to reduce it.

Try to keep purchases within reason even though you may see some retail sales at discounts. Consumer spending on your part is one thing you can control when it comes to wants rather than true needs. Cash flow is critical right now, so the joy from new things in the short term won’t last.

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Now is Not the Time to Make Big Purchases

Maybe you’re thinking about buying a new home or car soon. Or some of you may even be planning a luxury dream vacation that’s all-inclusive. As painful as it may be for some of you to hear, now is not the time to be emptying out your bank account for such purchases. The last thing that you want is to be even more strapped for cash than you already are. Financial stability should be your focus so long-term financial security can be realized.

Find Yourself a Side Hustle

If you’re looking for a way to earn some extra funds, then look no further than the side hustle for additional income. A side hustle is any form of part-time job that you do outside of your day job. This could be anything from freelance writing and graphic design to taking on odd jobs such as pet sitting or lawn care. There’s always something out there that you can do if you put in a little effort. And with the money that you earn, you could put it towards debt or an emergency fund to help get your family through tough times. Worst-case scenarios involve you stepping outside of your comfort zone and finding a side hustle you really like! 7 Smart Tips for Surviving a Recession

Delay Your Retirement

Many of you may be thinking about retiring within the next year or so as you approach retirement age. You may not like what I have to say, but you may want to push that date back until the economy starts to rebound. That way you’re not dipping into your retirement funds early, leaving you stretched thin for cash several years down the road. Delaying your retirement can help you save more for retirement and give you the confidence to know that your future is secure, even in times of economic hardship.

We all get tired and really look forward to those retirement dreams of golf, beach, grandkid visits, and more. Take some time to research how much more you can receive in social security benefits by waiting and working until you’re 70 years old. You’ll be surprised what the difference in monthly income will be rather than retiring at 62!

What can slow you down in a recession?

• High-interest debt
• Credit card debt
• Unexpected expenses
• A personal loan you may have
• Having student loans

What can help you to save money in a recession?

• Start with lowering your interest rate on debt (in order to eliminate it faster)
• Discretionary spending
• Getting a side gig
• Earning extra income where you can
• Staying out of your cash reserves
• Having 3 months’ worth of emergency savings put away
• Talk to a financial advisor
• Balance transfer credit card with zero interest for a few months

More Tips for How to Save Money in a Recession

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Final Word

With these tips, I’m hoping that you’ll be able to come out of a recession unscathed. Saving money and being prepared can mean the difference between financial ruin and stability during an economic crisis. Now is the time to save, so don’t wait until it’s too late! Can you think of any other simple ways to save money before and during a recession? Now is the perfect time to follow these money-saving tips, so that you don’t find yourself in a tough financial situation. May God Bless this world, Linda

Copyright Images: Person Using a Calculator AdobeStock_511443111 by Ming