By all measures, it has been a bad month for the American economy. Whether or not we’re about to enter a deep full-scale recession — or possibly even a depression — isn’t quite clear yet. However, it’s fairly obvious that the coronavirus pandemic has had a significant impact on the monetary outlook of virtually every person on the planet. Given that fact, it’s important for business owners, investors, entrepreneurs, and professionals in all walks of life to understand how to manage their finances during an economic downturn. Thankfully, there are proven ways to help you do exactly that. Here are four of the most basic ones:
Don’t Panic!
One of the hardest things to do during a recession is to remain calm. After all, no one likes to see the stock market plummet, interest rates hitting near zero, or a spike in unemployment. Yet, individuals who manage their finances successfully know not to panic during trying times just as they don’t get ahead of themselves in bull markets. Resist the urge to empty your 401k or pull all of your savings out of the bank. Doing so will only make your personal financial situation worse.
Prioritize Your Purchases
An “essential purchase” under normal circumstances and an essential purchase during a recession are two different things. Individuals and businesses alike need to take a hard look in the mirror and decide what products or services they need to invest in, and what they can let slide. Business owners can create a priority list that includes important items like point of sale solution software or a new VoIP phone system. Similarly, individuals should cut out frivolous purchases and focus on issues that are most pressing in the short term.
Get Creative
Crisis is just another word for “opportunity.” The reality is that some businesses end up thriving during a recession. Individuals should look for new ways to invest their money. And business owners should strive to provide new and better services to accommodate customers in a new economic environment. Doing what you’ve always done during a recession isn’t like to pay off; so be willing to change things up and take a few chances.
Help Others
Recessions and depressions affect everyone. Yes, people have a responsibility to look after their own well-being first and foremost. Still, those who are lucky enough to avoid catastrophe during a recession have a societal obligation to give to others who weren’t so lucky. Consider donating to charitable organizations that provide food and shelter for the less-fortunate in your community. Or, patronize a local business that may have struggled during the recession. Even small acts of kindness and generosity can go a long way!
Photo Credit: Dorothea Lange
Good one.
Thanks, McLaren.
Actually the way to manage your finances during a depression is to start BEFORE the depression, when times are good. “An “essential purchase” under normal circumstances and an essential purchase during a recession are two different things.” I’d have to disagree with you Len. If a business makes only truly essential purchases when times are booming, as the economy did under Trump until we were struck by this plague, the businesses can bank the money which didn’t get spent on non essentials. This provides a financial cushion for when the hard times come, which they always do. It also means an individual or a business can take advantage of buying opportunities when the non thrifty are forced to sell or lose everything because they have no rainy day fund. The same is true of households. I deal in used goods. It is amazing how cheap it is to buy often brand new with tags or like new things at yard, estate and house sales for pennies on the dollar. Or to take things off the curb for free after the sales are over. The disdain most people feel for their possessions once they are bored with them is stunning. Maybe it would have been better to buy less shiny new stuff to discard and bank the cash instead. I was mostly raised by Grandparents who were newlyweds during the Great Depression and they never lost their thrifty ways and those customs were their greatest legacy to me. They always lived comfortably. They managed to save enough to own their tiny cottage free and clear, raise most of their vegetables and fruits in their yard, my Grandfather loved to fish (A cheap hobby, he dug worms from the garden for bait, or made “dough balls from cotton balls, flour and water, and owned one pole and reel the whole time I knew him.) and they ate his catches, they canned excess produce and stored vegetables in the root cellar. They cooked all their meals at home and were extremely happy, content people. My Grandmother sewed my clothes and made beautiful quilts for her hobbies, she baked for the fun of it. Their furniture was mostly inherited things of excellent quality from her family home which I still happily use to this day. I do remember when interest rates were super high that they shopped around for the LOWEST bank rate so that they would not earn so much interest on their modest saving so as not to have to pay a tax on their social security check. Americans are wonderful people but they buy so much useless stuff instead of saving money for a rainy day.