If you’re uneasy about the economy, an upcoming recession or spending money in general, you’re far from alone. Financial experts, millennials and anyone whose job was deemed redundant won’t soon forget the devastating effects of the most recent recession. But even though signs point to another one happening soon, you can (and should) still do something now to make things easier on yourself later. With an emergency savings buffer, you’ll be more prepared to deal with any negative effects of a recession. These six steps can help you quickly build your personal savings up before the next recession.
Step 1: Trim Down Your Budget
If you don’t actually have or follow a budget, you should start with that first; use a free budget worksheet or one of the free budgeting smartphone apps like Money Dashboard to plan and track your expenses. In order to make a proper budget, you’ll need to determine a realistic plan for your specific situation. Be honest with yourself about your true needs (fixed expenses) versus your personal spending habits.
If possible, use an online banking account to scour through the past few months of your expenses and search for any recurring or avoidable charges. Do you actually use your cable service or that gym membership? Do you indulge your desires a bit too much? A treat isn’t really all that special when you gift yourself too often or with something you can’t truly afford.
Reduce your budget by getting rid of anything you don’t really need or use right now, and put the money you save directly into a separate savings account. Make sure you’re getting the best price for anything that you keep, like home internet or cell phone service. You might also be able to negotiate your recurring expenses to save some money. It can’t hurt to ask, and if you don’t, you’ll never know!
Step 2: Set Clear Goals
There’s no telling how long a recession may last, when one may come or whether or not it will actually affect you. But there is a very good reason to focus on your savings goals: Research suggests that you’re more likely to achieve your goals when you write them down.1 And actually achieving them can help build up your confidence as you aim for harder-to-reach objectives. As a general rule, experts recommend aiming for around three to six months of expenses in a personal emergency fund, but that amount will vary depending on your specific needs, whether you have dependents or debt, and other factors.
Step 3: Automate Saving
When you don’t have to think about saving money, you won’t be able to forget to do it in the first place. You can set up repeating transfers into a separate savings account with your bank, or ask your employer to deposit some of your paycheck directly into an account separate from your checking. A high interest savings account is a good place to store your emergency or recession savings fund.
If you want a more technologically advanced approach to saving money, you can use some of the latest micro-investing apps like Chip. Chip works by analysing your spending over a period of time and investing small amounts that the AI-powered interface thinks you can afford based on your income and expenses. The visual interface is especially inspirational; you can set goals and actually watch your progress as you save money over time.
Step 4: Look for Ways to Earn More Money
Do you know what your job is worth? You can research your job title and responsibilities to determine a relative salary range for your area and level. If you’re undercompensated (and fairly confident in your position at work), you can bring this to the attention of your employer. While there are no guarantees you’ll get more money, you can also look for more competitive compensation elsewhere. Or, if you have spare time, consider picking up a side gig or doing odd jobs for friends and family. No matter how you increase your income, earning more money now will help put you closer to goals in less time.
Step 5: Learn How to Cook
If you don’t already, regularly cooking your own meals can seriously improve your life, from more nutritious and creative dishes for yourself and your family to spending less at the grocery store. When you know how much goes into each dish, you’ll know exactly what to buy, which can also help you prevent food waste.
Invest in some good cookware, search the internet for recipes that incorporate your favourite ingredients and experiment with high-quality spices and herbs. Over time, you’ll learn more about your own preferences while you develop your craft.
Step 6: Embrace Stay-Home Nights
Going out regularly can really take a toll on your budget, especially when you factor in transportation, tax, tipping and any other surcharge. But you definitely don’t need to become reclusive just for the sake of saving money; just take turns hosting a gaming get-together, dinner party or at-home movie within your circle of friends. Not only is a potluck more personal than eating food at a random restaurant, but you can practise new recipes to help improve your skills in the kitchen (see above step).
1Economy, P. (28 February 2018). This is the way you need to write down your goals for faster success. Retrieved 20 September 2018, from https://www.inc.com/peter-economy/this-is-way-you-need-to-write-down-your-goals-for-faster-success.html