Let's face it. We're officially in a recession. The focus has now shifted from what to do in this recession caused by the pandemic to what a recovery will look like.
Many of us are hoping the economy will bounce back quickly, so we can get back on our feet. But if your finances took a hit, you're probably wondering whether you will manage to fully recover, and if so, how soon.
It's OK to feel that way. Economic downturns like massive job losses and salary cuts can be out of your control. But one thing is certain- this will not be the last recession. And people who don't learn from these challenging times are more likely to make the same mistakes.
We don't want you to be one of them. We've compiled a list of four financial lessons from the pandemic to help you and your loved ones move past this recession and thrive.
If you're constantly worrying about money, you need to get organized. Collect all your financial statements and figure out your budget. Find out how much money you have, your income, and where your money is going.
List and sum up all your necessities and determine how much they cost. And here, we're talking about mortgage, rent, food, medications, and utilities.
Other things that fall outside these brackets are not must-haves. You can do without in a recession to help you cut back.
Learn To Speak Up And Negotiate
During the pandemic, many people struggled to pay bills and meet other financial obligations like repaying debts. And it taught us the importance of communication.
If you ever face the same challenge, learn to communicate with people and institutions expecting payments from you. But don't stop there.
Talk to anyone who can help. You may find some relief like assistance programs or get better deals like postponing payments.
Stock Up On Cash
Before the pandemic, many of us lived largely. After all, we have our jobs and are guaranteed of getting paid. But when the effects of the pandemic started hitting hard, we wished we saved for rainy days.
Experts recommend having at least six months' worth of living expenses saved for an emergency. However, if you're just starting, aim to stock cash at least three months' worth of living costs.
To approximate how much you need, calculate the amount of money you spend every month and get an average of four months. If you have kids, add some extra money for them.
Invest Wisely Where You Can
Now that the pandemic has shown us that depending on one stream of income can be risky, it's wise to have another source of income. So if you still have income, or when you start making some money consider investing your money wisely.
An investment can be building a side hustle, a business, or saving for retirement. Whatever you do, don't rush.
The secret of investing wisely is being slow and steady. For example, if you want to increase your retirement portfolio, increase your 401 (k) contributions. Increments that appear small now can add up big time over time.
And while at it, it may be wise to invest your post-tax money in a Roth account. You can easily withdraw your contributions in case of an emergency without losing money in taxes and penalties.
Recessions are bound to happen. And although others may not be caused by a pandemic, the effects can be similar. If we don't learn from this recession, we risk making the same mistakes again. We hope these lessons and tips help you and your loved ones move past the pandemic and be more prepared to face any financial challenges in the future.