Let’s be real; the first part of 2020 has been a doozy. As we all shelter-in-place, many of us are trying to work while also watching tiny humans who laugh in the face of proper office etiquette. We’re all craving and hoping for life to go back to some semblance of normal, stat.
I’m a planner by nature. I like to have plans and backup plans, but with little to no control over what’s ahead, I’ve struggled to keep peace amid these very uncertain times. Among the most anxiety-producing headlines for me, are the ones warning of pending economic downturn and financial doom. I’ve spent more time than I care to admit trying to predict what that means. As a small business owner, I’ve already taken a hit this year. It’s nerve-wracking to think through a prolonged period of uncertainty or even a significant collapse.
Something I’ve found helpful to me when facing unknowns is to play out various scenarios and think through how I’d respond. It satiates the planning desires within me and helps me figure out how, regardless of what the environment around us does, my family will be okay.
As we look ahead into a very uncertain future, I’ve researched and put together some of the best tips I’ve found for surviving an economic downturn, should that be something we face in the coming years.
1. Live on a Budget- Like, Actually.
My husband and I have gone through Dave Ramsey’s Financial Peace University together (which I highly recommend), and in it, he makes the distinction between “Free Spirits” and “Nerds.” Nerds are people who love looking at budgets and spreadsheets, and Free Spirits do not. In the course, he talks as though each couple has one Free Spirit and one Nerd. After taking the quiz, it was clear my husband and I both fall into the Free Spirit category. Me being a Free Spirit may be surprising to people because I do love to talk about money. Still, my passion lies more in the fact that money can help you reach other goals that involve fun and getting to travel, versus actually enjoying keeping up with the numbers.
All that said, neither of us likes or are naturally great at maintaining a budget. I’ve managed to keep an excel spreadsheet through the years where we’ve very loosely tracked our expenses, but there was minimal strategy or intentionality to it. Instead, we just tried to be frugal and smart with our spending. Unfortunately, for most people, that doesn’t work, and it didn’t work for us. We were still spending more than we intended and not meeting our money goals.
That’s why we’ve since adopted using a zero-based budget, where you factor every dollar and “give it a job.” Trust me, it’s still a process for us, as neither of us enjoys it. But, it saves us a lot of money and takes the stress and confusion away from just “hoping it all works out” at the end of the month.
We love using Dave Ramsey’s Every Dollar app, as it’s super simple and syncs with your bank. I’ve also heard great things about the YNAB app. Regardless of what system you use, learn to use a budget. Like, actually… no matter how much you hate it. If we’re bracing for a bumpy ride, think of a budget like putting on your seat belt. You just have to do it.
2. Shore Up Your Vulnerabilities
This is a tricky point to make, because on the one hand, as a global economy, we need people to spend money to keep the economy going. From an individual standpoint, however, if the economy crashes and you run out of money, you won’t be able to spend anyway. Therefore, if you don’t have a substantial emergency fund, it’s essential to cut as much as you can now. Try as best you can to have at least three months of bare-bones expenses saved, and if you can get to up to a year, that’s ideal. It is recommended to put your money in a high-yield savings account that you can access easily if needed
Review your budget and think through what is essentials versus wants or likes. Think through those subscriptions you don’t use much, that auto-draft from your account each month. Have you thought about selling one of your vehicles or items in your home? If so, do it now, while many people are still gainfully employed. If things do eventually hit the fan, many people will be going through their garages and trying to sell unneeded items, which will drive prices down lower.
Also, try negotiating with service providers. Last year, after far too many battles with our internet provider about creeping up our rate each month, we finally decided to give them the boot and find a much cheaper, yet high-quality plan. We combed through all of our expenses and found that we were paying more than necessary to several providers. We hacked away at each bill, searching for where we could save, even if just a few dollars. Surprisingly, we were able to save over $300 each month by the time we finished our review!
Go through your list of bills, and see what costs you can lower. Call to see if your providers have better prices available, or consider switching to a competitor if they have a great sign-up offer. Cell phone and internet providers consistently offer new deals and promotions. Competitive car insurance providers may offer a lower rate than your current payment.
Mortgage rates have also been at record lows. If you have equity in your home, plan on staying put for a while, and could get a significantly lower interest rate, it may be worth it to consider refinancing. It has the potential to save you several hundred dollars a month!
It’s like preparing for a hurricane. I’ve never personally lived in a hurricane-prone area, but we’ve all seen news stories with video of people boarding their windows and preparing their homes before a storm. Take this approach with your budget, as it is much easier to shore up your weak areas when the hurricane is just off-shore versus when you’re in the eye. And although many people who board their windows end up not taking a direct hit, it is better to be prepared. If you shore up your expenses, save money, and the storm is more mellow than worse-case-scenario, then BAM… you have a nice chunk of savings already ready to take advantage of likely rock-bottom travel prices in the future.
3. Be Smart About Food
One of the most common budget busters is food. My husband and I have really struggled in this area. We both love clean eating, yet often are short on time and need convenience. We both have big appetites, and healthy food that actually fills you up can get expensive FAST! When we revisited our budget recently, I was appalled at how much of our money was bleeding away into the food category. We’ve since worked hard to change our approach to food spending, and while it’s still nowhere near perfect, we’ve saved over $300 most months with just a bit of strategy.
One of the easiest ways to cut your food budget is to opt for less healthy, grocery store convenience foods, but I wouldn’t recommend that. There is so much research about food-choices impacting both your physical and mental health. While these foods may help you save a little time and money in the short-run, they can cost you tremendously in the long-run.
For my family, we have found meal-planning and batch-cooking very helpful. I’ll research affordable recipes at the beginning of the month and try to get all of the non-perishable items at once. Some of the recipes, like soups or stews, I’ll cook all at once and freeze. For others, I’ll do much smaller grocery runs each week to pick up perishables. Given that I don’t have to meal plan every week and grocery shop for all items (sometimes buying the same things I bought the week before), I save a lot of time! And by devoting time to it once a month, I am far more intentional and less rushed in following our budget.
If you are serious about cutting your budget down, research the absolute cheapest healthy meal recipes. While they may not be very exciting, you’d be far better off eating ultra-cheap beans and rice-based meals than eating junk or blowing your budget.
There has been a recent surge, rightfully so, in the popularity of gardening. Once you have everything set up, it is far cheaper than buying organic fruits and vegetables at the store. It also gives you some degree of control over your food supply. If you are short of space, Google search “urban gardening.” You’ll find loads of articles and videos to help you grow your food, even if you don’t have much room.
If you still like eating out, which we do, learn which restaurants offer deals and only eat out when you can get a special. For example, we love fast Mexican restaurants. This week, we got “Moe’s Monday” burritos for just over $5 apiece. $12 to satiate our desire to eat out beats the heck out of regular, $30 tabs we used to rack up regularly when we weren’t mindful.
4. Earn More
No matter how frugal you are, you can only cut so much. If your income isn’t very high to begin with, to accelerate your savings, figure out ways to earn more money. One of the most popular topics for financial bloggers today is talk about side hustles. Google search the subject, and you will see all sorts of guidance and resources to guide you.
There are so many ways to earn money on the side, even if you have a full-time job or an odd schedule. In today’s economy, Instacart and food delivery services are leading the charge of providing steady, side-hustle incomes. Stay-at-home parents can offer to watch additional children or pick up a freelance writing gig during nap time. And once social distancing policies ease, Uber, TaskRabbit, household chores, lawn maintenance, and many additional services allow you the opportunity to make more money.
As we’ve discussed, beefed up savings accounts are the gold standard when preparing to weather an economic storm. Figure out ways to provide value in multiple ways to increase your earnings and savings.
5. Prepare Your Mindset
Beyond all else, prepare yourself to mentally. Statistics have shown substantially higher rates of suicide during recessions and depressions. It is difficult to control anxiety and emotions when there is so much unknown. The most potent weapon you have in your arsenal should things take a turn for the worse, is your own mind. Your ability to control your state will play a massive part in determining how you come out on the other side.
The economy has had a smooth ride for a long time here in America. The markets have experienced a steady rise for the last ten years, and in 2019, consumption was at an all-time high. A sharp decline is a hard blow for everyone. Change is hard, and changing habits is even harder. But the more flexible and willing to adapt you are, the stronger you will be as you navigate these strange times, and more likely you will be to come out better on the other side.
To build your own inner strength:
- Invest in some great books to help build you up, or find a few great podcasts that inspire you. When you feel yourself slipping into a funk, dive into this inspiring material and allow it to drown out the negativity.
- Download a mindfulness app, like Headspace, that will teach you to catch your breath and meditate.
- Find a few hobbies or workouts that instantly change your state. For me, even though I often have no desire to do it, going out for a run makes me feel so much better. And if I can’t find the mojo to run, a simple nature walk can work wonders.
The truth is, none of us know what is ahead in the coming year. My husband and I have already begun shoring up our finances, redoing our budget, and seeking to pour everything we can back into our emergency fund. Best case scenario, we’ll all be back to work in the fall and have tightened our finances in a way that prepares us for an excellent 2021 and beyond. And if we do end up in one of the scary gloom-and-doom scenarios, then hopefully we’ll all be able to weather the storm in a house built of stone, without fear of it all washing away.
This post has covered the foundation of financial preparedness. In past recessions, many people actually gained financial ground and got ahead. In the next post, we’re going to go a step further beyond survival and explore how to THRIVE in an economic downturn. Stay tuned…