It’s always important to intentionally manage your personal finances. During times of economic downturn, it becomes even more important.
With volatile investment markets, potential jobs losses or income reductions, etc., running a simple and effective financial plan can help you get through bad economic periods with more peace and confidence.
I’ve written before about about simple living money habits that we follow, like setting goals, budgeting, avoiding debt, and saving your money. These are fundamental personal finance principles that work both in good times and bad.
But in the midst of economic downturns, here are 5 tips you can use to manage your finances better:
- Use Your Budget – Your household budget is the key to controlling your money. By assigning every dollar you have a job, you are able to understand your baseline expenses. During tight periods, this also allows you to cut spending to meet immediate needs.
- Pad the Emergency Fund – I always would recommend having 3-6 months of expenses in your emergency fund. But during down times, it often makes sense to pad your life with a little extra cash because of an increased risk of job loss or income reduction.
- Stick to Your Plan – It’s easy to become fearful during economic uncertainty. But it’s important you don’t deviate from your plan. Don’t panic sell, keep investing (if possible), and don’t break the budget with stress-induced purchases.
- Remain Grateful – During periods where we experience loss, its important to remain grateful for what we do have. Remember that money is not everything, and that life will move on. Meditate on the good things in your life.
- Look for Opportunities – If you’ve already been following simple financial practices and find yourself with extra cash, market downturns can be provide an opportunity for discounted prices. My wife and I use Robinhood to invest non retirement money into index funds and our favorite companies.