If you want to ensure that the next economic downturn does not harm you, but rather creates great opportunities for you, follow the Winter is Coming theory. It simply states that winter will always come, but you never know how harsh it will be, so prepare for the worst, hope for the best, and be ready to take advantage of the rest. Here are some ways to safeguard your money and finances during a recession.
Take a financial stock of all your assets, money, expenses, debts, and obligations.
You should do this at least once a year so you can take advantage of economic booms to get your personal finances in line so that when the next downturn hits it won’t take you down with it.
Build an Emergency Fund
Like a savings account, it can get you through a rough patch. If you don’t already have one now is the time to start one, if you have saved more.
Avoid Unnecessary spending
Cut expenses you can live without- it’s not only about how much money you make it’s also about how much you spend. The less money you need to pay your bills, the longer your money will last you.
Don’t take on more debt
Unless the asset pays for the debt service. Don’t buy a depreciating asset like a car, for example, and if you buy an appreciating asset like an investment property make sure the rental income will cover the debt service
Create extra income streams
Something you can do in addition to your full-time job to supplement your income or create some sort of rental income whether it’s a room in your home or your car.
Ensure you have a high credit score
At all costs raise your credit score or protect it. Credit is your key to leverage and leverage can be a powerful tool in an economic downturn whether it’s to save you money or help you acquire more assets.
Pay down high interest debt
This will hurt your pocket initially but will get you out of the debt trap that is impossible due to high interest rates and will result in long term relief later.
Don’t panic!
Stick to your investment strategy no matter what the market does- over time things correct. The worst you can do is be reactive daily to the market and make changes to your investment direction out of fear.
There cannot be only good times; bad times must also occur. So, when the good times come, use that time to prepare for the bad times by following the tips we discussed. And when times are tough, as they are for banks, your family’s bank account is your business, and you must budget. Real estate investments are best purchased during the downturn with the savings from the boom.
If you are looking at the option of buying a home in the San Francisco or the Peninsula in the near future, please reach out to us.
