Personal Finance

Financial Planning in a Bad Economy

Many people get overwhelmed and stress out during bad economic times. Recessions can cause businesses to go under, unemployment to rise and slow down the global economy.

Financial planning in a bad economy is a stressful thing to think about. There are many factors to consider when outlining your expenses. If you are organized and frugal, you will be able to navigate yourself through the tough times ahead. Financial planning is always a critical component of your personal finances, but becomes more prevalent during a bad economy. When there is a pullback in the market, businesses tend to go out of business, people lose their jobs and a slow down hits the economy hard.

When turbulent times hit the economy, it is important to speak to a qualified financial advisor who can help guide you during critical times. While your financial advisor can certainly help guide you, it is also important for you to understand the economy and how a recession can have an impact on your finances.

There are many different components that play a role in economy; each can factor into the global economy. Dating back to the dot com crash in the early 2000’s and the housing crash in 2007-2008, investors have rode out long-winded bull markets that have flooded their pockets with profits. When market pull-backs hit, they can hit hard. As the economy goes into turbulent times, there are only so many things you can do to prepare yourself for what’s ahead.

Financial Planning For Bad Economies

You may not be able to control the economy, but you can manage your own personal finances to help you be more prepared for a bad economy. Financial planning in a bad economy can help protect yourself and your family in the future. Many people fear for a recession and are unsure how to survive a bad economy. Rather than being paranoid about something out of your control, you can focus your energy on being better prepared.

Make sure you do your part in saving money each month to build up a safety cushion for yourself. Boosting your savings account will give you confidence as the economy heads into a bearish market. Maintaining a sufficient cash savings in your bank accounts will give you a greater confidence in a recession.

If you are worried about surviving a bad economy, keep in mind you know your finances best. If you are unsure about your financial security, it is helpful to evaluate your total net assets so you can plan accordingly. Make sure you can afford to pay your bills on time and avoid overspending when you don’t have to. Stacking away as much cash as possible will give you more leverage and comfort during a bad economy.

Tips to Saving Money

Financial planning in a bad economy requires you to trim down your expenses and cut costs anywhere you can. It’s not easy to save money. Many people struggle to set aside savings each month. This causes them to dig into credit card debt by relying on credit cards to make big purchases. Rather than relying on credit cards for emergencies, it is helpful to learn how to save money to be prepared.

You don’t have to make yourself suffer and you don’t have to deprive your family of their favorite groceries. Just be mindful of your shopping habits and be cautious about the money your are spending.

Financial Planning in a Bad Economy - Smart Savers Discount Shopping

Buy Smart and Save on Discounts

There is no reason to buy in bulk unless you will finish everything you buy. Buying in bulk is often suggested, especially during economic downturns. However, the cost of wasted food cannot be misunderstood. If you decide to buy food in bulk to save a few bucks, you might end up wasting food (and money) if you let it go to waste. Finding good discounts on necessities is always recommended, but do not go out of your way to buy in bulk if you do not think it is necessary.

Although the economy might be hitting a rough patch, you still need to be able to trust yourself when doing your grocery shopping. At the same time, be accountable for what you are buying and cut costs where applicable. Don’t overstock on unnecessary items and make sure you hunt for any coupons prior to leaving for the store. Saving a few cents here and there can pay off during hard times.

It is always recommended to seek out additional discount savings while doing your shopping. It might not make a huge dent in your finances, but it trains you to save where you can. If you’re unsure about the best places to shop for your essentials, you can choose from local grocery stores, big box retailers like Target or Walmart, or you can order your items online. There are plenty of different ways to find affordable groceries, each store having their own advantages and disadvantages.

Forced Savings

No matter what kind of condition the economy is in, you should always be striving to learn new ways to save money. Practice setting aside 10% of your monthly income and depositing it into a high-yield savings account. While you won’t get rich by doing this, you will learn how to ration your income and teach you how to build up a savings account. You can take this another step further by automating this monthly deposit. This forces you to save a portion of your money without even thinking about it.

You should use the same strategy when making your contributions to your retirement accounts as well. You should have a 401K, IRA or some type of retirement fund that you can make contributions each month. Retirement contributions may sound boring, but they come with tax benefits and are another way to force yourself to save for the long-term.

Getting Rich During Recession

Rarely do you see stock prices as cheap as you do when a recession hits. When the economy takes a severe dive into a bearish market, you can typically find stocks on discount. Many people dream of discounted prices when shopping for merchandise. But when it comes to stocks, people are hesitant about buying new shares. For this reason, only the people who take risks and invest during dark times are able to get wealthy during a recession.

Financial Planning in a Bad Economy - Investing During Bear Market

It is not recommended to attempt timing the market’s lowest point. Timing the dip perfectly is almost an impossible feat to accomplish. Instead, you are better off buying shares of good, quality companies in small increments as the stock prices continue to fall. Financial planning in a bad economy requires patience and detailed analysis of each of your investments to see where you can improve your position.

Buying shares in small increments has always been a tough thing to do with commission fees. However, with the recent elimination of commission fees on some of the biggest trading apps like Fidelity and E-Trade, it is recommended to buy as needed. Buying shares in small increments gives you the ability to lower the average cost per share on your investments as prices continue to fall.

Financial Planning for Bad Economies and Future Pullbacks

It’s always tempting to buy nice things when you have money in your bank account. Spending money is such an easy thing to do, especially when you’re acquiring new items. People crave new clothing, devices, cars, jewelry; but it comes at an expense. Many high-priced items tend to put consumers into bad financial positions. Be wise about how you spend your money; once it’s gone, it’s gone.


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