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Recession—Part of the Economic Cycle
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Daily Bread
Clothe yourselves with compassion, kindness, humility, gentleness and patience. Colossians 3:12 |
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Reminders on how to spend carefully and build savings Recession is a natural part of the economic cycle and usually lingers between six and 18 months. The rapidly rising unemployment rate has caused this recession to last longer. No one knows for sure when it will be over. Because slowing business growth has caused stagnation in pay increases and rising energy prices has caused a significant increase in the cost of living, it is important that we continue be prepared during this recession. Here are some reminders on how to spend carefully and build savings.
Start with the debt with the lowest balance and the highest interest rate first and alternate with smaller bills that you can pay off quickly. Paying off the highest interest rate first will save you the most money in the long run. It can be discouraging, so alternating between the larger and smaller bills will help you feel like you are getting somewhere. The key is to aggressively reduce these debts and stick to your plan. Track Spending and Create a Budget You know how much you bring in, but do you know where it all goes? One of the first steps in creating your budget is tracking your spending. Gather your receipts for the month and separate them into three categories: fixed expenses, variable expenses, and non essential expenses. You may be surprised at how much you are spending on variable expenses and unnecessary items. Use this information to free up some of your money so you can easily add to your emergency fund. Take Steps to Reduce Variable Expenses Variable expenses such as the utility bills, clothing, and groceries, are some of the easiest to cut back. Call your phone company and negotiate a better rate, use coupons for groceries, buy in bulk, and shop for clothing at discount stores. Build an Emergency Fund An emergency fund is money you save for unexpected expenses and should not be used on luxury items, vacations, or anything except an emergency. How much you should save depends on your own situation, but it is recommended to save at least 6-9 months worth of your salary. Ideally, when you reduce your expenses and pay off debt, you will add to your emergency fund. Continuously adding to your emergency fund is a good idea whether we are in a recession or not. Be Optimistic Being mentally prepared is as important as being financially prepared. Remember that recessions are a natural part of the economic cycle. Whether the 2008 recession lasts six months or five years, you will get through it. Knowing the possibilities, planning ahead and preparing yourself for the worst will help you feel more secure with less stress and worry.
Published: March 2010
Source: CONCERN Employee Assistance Program, an affiliate of Baptist Memorial Health Care  Top of Page |
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