Recessions suck. The stock market is down, unemployment is up, and good news is sparse. But a tough economy doesn’t mean that you can’t improve your lot in life.
We’ve decided to use the recession as a time to simplify our lives and build a better financial system for our family. What follows are some of the steps we’ve been taking to shore up our finances.
Seek additional income sources
If your emergency fund is small (or non-existent), or you simply feel a need to improve your safety net to protect against possible job loss, look for ways to generate extra income. You might be skeptical due to the high unemployment rate, but that doesn’t mean it can’t be done.
In order to succeed, you’ll need to think creatively and be willing to try something new. Consider the following…
- Get a part-time/temporary job, or do odd jobs. This option can be time-consuming, so be sure any opportunity that you pursue fits your existing work schedule.
- Sell used stuff on eBay. You can reduce clutter and raise some cash for yourself and your family.
- Look at your skills and freelance. I’ve personally found this to be a practical way of generating some income and beefing up my resume.
At a loss for specific ideas? Check out this list of ways to earn extra money.
Organize your finances
Now is the time to reduce your unnecessary expenses. Your goal should be to increase the difference between your income and expenses, thereby giving you the leeway to build a financial cushion. One great way to start is to simply create an automatic transfer that puts a bit of extra money into savings every pay period.
- Review your recurring expenses. If you’re paying a monthly fee for something that you’re not using, or not using enough, then get rid of it.
- See if you can reduce your bills. Start looking at your expenses to see if you can reduce any of them. You can often save money by negotiating your bills, even without reducing your service.
- Pay your bills on time. Having a good credit history can help you in a variety of areas, such as finding a job, saving money on insurance, reducing your interest rates, etc.
- Automate your bills. We automated our bill payments to save time and reduce late fees. Many banks and credit unions now have free online bill pay, so it’s cheap and easy.
Be careful with your credit cards
As convenient as they are, credit cards can be a dangerous thing. Don’t fall into the credit card trap when times are tight.
- Don’t use credit cards to make ends meet. You might be tempted to use your credit cards to get through tough times. Don’t do it. If you can’t afford something, then wait and save before spending.
- Get a better rate. If you carry a balance, call your credit card companies and ask them to reduce your interest rates and/or work on a doable payment plan.
- Review your monthly statements. Identity theft and other types of fraud are becoming more common, so be sure to look closely at your statements every month. You might also want to check your credit report.
- Keep your credit payments in check. If you’re unable to pay the minimum amount due, call your credit card company and talk to them about setting up an affordable plan.
Don’t rush to use government programs
Instead of making a rash decision, carefully weigh the costs and ask yourself if this is something that you really need (and can afford). These programs can be a great deal for those who were already looking to buy, but they shouldn’t be used as a justification to buy.
What steps have you taken to solidify your finances in the face of the recession? Do you have any tips you can share?