Recession-Proof Your Spending
How to Curb Your Buying Habits During an Economic Downturn
The housing market, gas prices and high consumer debt may signal a recession. How to handle your spending and which buying decisions to make.
Even if you haven’t lost your job, you’re not facing foreclosure and gas prices aren’t really affecting you, a new spending plan should be in place, just in case.
How to Cut Back and Re-Prioritize During an Economic Downturn:
- Shop discount and warehouse stores. Even if you’re only feeding a family of one, a warehouse club is worth checking out. You can save a lot on non-perishables like paper goods and pharmaceuticals. Even fruits and vegetables are cheaper at Sam’s and Costco. They don’t always come in enormous sizes. For clothes, steer clear of department stores and head to discount chains like TJ Maxx and Marshalls. You’ll have to do some digging, but you’ll often find great deals on overstocks and discontinued items. They’re not limited to clothes either. You can usually find bed linens and home décor in the back of the store.
- Take advantage of coupons. Even if scouring the Sunday paper for the best deals isn’t your favorite activity, at least search the internet before you go shopping to see if there are any money-saving coupons you could print out.
What You Should Spend Money on:
- A fuel efficient car. If your Suburban is on its last legs, consider trading it in for a smaller more economical vehicle. Hybrids often get 45 to 60 miles per gallon in the city and 50 to 65 mpg on the highway.
- Computer classes. If there is a way to hone those highly marketable skills, do it now. You never know when the ax will fall and you may be the next to get laid off. If your resume is up-to-date and you have sought-after skills in the marketplace, you’ll feel much more confident and prepared.
Start Saving and Set up an Emergency Fund:
Paying off all your debts should be your number one priority. After that, consider which savings vehicle to invest in. If you have enough assets it wouldn’t hurt to talk to a certified financial planner about what direction to take.
Refinance your home loan to a 15-year fixed rate. If you haven’t done so already, get rid of that adjustable rate mortgage and lock into a shorter term fixed rate loan. But look at all the up-front loan processing fees to make sure this move is worthwhile. Whatever you do, don’t extend the length of your mortgage. You’ll only hurt yourself by agreeing to pay even more interest over a longer period of time.
Remember, recessions usually last less than two years. So it’s a good idea to start planning for the long term. It’s never too early to start saving for retirement.
