There is a lot of uncertainty surrounding the COVID-19 outbreak as medical experts and government officials continue to research this potentially deadly virus and the impact it will have on the nation. What is very clear, however, is that the measures taken to safeguard the American people against the spread of the coronavirus will most certainly have an impact on the economy.
The longer Americans remain in their homes unable to earn or spend money, the greater the impact will be on the economy. In fact, there are some financial experts that predict the outcome could be worse than the recession in 2008. While there isn’t much you can do single-handedly to resolve this pandemic, individuals are urged to pay attention to their finances.
So, are you financially prepared for a down economy? Answer these questions below to determine just how ready you really are.
Do You Have Multiple Streams of Income?
During a down economy, businesses don’t have that much of a need to hire employees. As you’ve seen firsthand from the coronavirus outbreak, when consumers are sent to their homes and unable to spend money, businesses have had to let go of employees and even close their doors temporarily. If you don’t have at least 2 or 3 sources of income, you could find yourself struggling financially during a down economy.
Based on your educational background, skills, professional experience, and personal interests, what are some jobs you believe you would be good at? Now is the time to start putting in applications and getting the training you need to get hired. For those more interested in starting a business, you could use a quick funds loan to cover startup costs for your side hustle.
Do You Have an Emergency Savings Account?
Relying on the income you receive from your job isn’t foolproof. Especially in a down economy. Should your employer decide they can no longer keep you on payroll, how do you cover the regular expenses you need to survive? Since there are fewer jobs available, finding a replacement could take several weeks or months. If you have a savings account with at least 3 to 6 month’s worth of income in it, you’re way ahead of the rest.
Whether it’s covering your monthly expenses until you find gainful employment or covering an unexpected expense like a home or car repair, an emergency savings account is essential for surviving in a down economy. Though things might be tight at the moment, now is a good time to start putting every cent you can into a savings account for the rainy days that may lie ahead.
Do You Live Within or Below Your Means?
A horrible financial habit that many Americans have picked up is living well beyond their means. In order to afford the things they want and need they will spend more than they shouldn’t or borrow money to make purchases. This bad financial habit eventually leads to serious consequences including increased debt, ruined credit, and a reduced ability to purchase the things you really need. Breaking poor financial habits is a lot easier said than done, but if you’re going to survive in a down economy, breaking them is essential.
Start by reviewing your income vs. expenses. If your expenses outweigh your income, you need to eliminate unnecessary costs. This may mean something simple like stop eating out as much, cutting your gym membership, or ditching cable for a streaming service. However, it may mean making significant adjustments like downsizing to a smaller home or apartment, trading in that new car for a used one within your budget, etc. You want to get to the point where you’re spending about 50% of your income on necessities, 20% towards saving, and the remaining 30% can be used for things you want (to have fun).
If current times have taught you nothing else, it should be that efficient financial plans are essential to your survival during uncertainty. As the coronavirus continues to negatively impact the national and global economy, adults are strongly advised to start taking effective steps towards preparing for what’s to come. By ensuring that you have multiple streams of income, a hefty savings account, and that you’re living within or below your means, you can withstand the storm and make it through to brighter days.