Here are 10 ways to recession-proof your finances right now at any age
Like many other Americans, may be concerned about the impending recession. According to the most recent report All America Economic survey, 62% of Americans believe the country will enter a recession within the next year. Older Americans in their late 50s and beyond believe they are better prepared than younger generations to deal with a looming recession. Here are some recession-proofing strategies for people of all ages.
1.In your 20s and 30s: Shore up your assets
The first step toward securing your financial future is to devise a strategy for achieving your financial objectives, which can range from saving for an emergency to paying off student debt to purchasing your first home. Uncertainty about the economy may cause you to be hesitant, but remain determined.
2.Build your emergency fund
Make sure you have enough cash on hand to cover unexpected expenses such as a car repair or a medical emergency, especially as these costs continue to rise. To build your cash reserves, direct deposit 10% of each paycheck into a high-yield savings account.
According to financial experts, your emergency fund should cover three to six months of living expenses. In a recession, however, you’ll probably want more cash on hand, if you lose your job, it could take up to a year to find another.
3.Strengthen your resume
If the economy falters, you want to make sure that your most valuable asset, your income, remains as consistent as possible. Consider your marketable and transferable skills, which can help you stay employed even during difficult times. The vast majority of employers 93% believe “soft skills” are also important in hiring decisions. It discovered that the most common “soft skills” in job listings are communication, customer service, scheduling, and time management. Include these abilities in your resume and LinkedIn profile.
4.In your 40s and 50s: Play defense
You should be approaching or already in your prime earning years at this point. You probably have more financial responsibilities than ever before, such as owning a home, raising children, and saving for retirement. Put some safeguards in place in case the economy or life throws you a curveball.
5.Get proper insurance coverage
In uncertain times, having adequate insurance is one of the best ways to protect your financial life. You should have a car insurance policy, renters or homeowners insurance, and comprehensive health, disability, and life insurance coverage. Check your homeowners’ insurance policy to ensure that it covers rebuilding, not just the current market value of the home. During a recession, home values may fall. Consider purchasing an “umbrella” policy to supplement your liability coverage.
6.Make ‘catch-up’ contributions once eligible
You can make additional contributions to your retirement savings accounts once you reach the age of 50. If you already have a sizable emergency fund, it may make sense to boost your retirement accounts now. You could contribute up to $27,000 to a 401(k) or workplace retirement plan this year with a $6,500 “catch-up” contribution. With an additional $1,000 “catch-up” contribution, you can save up to $7,000 in an IRA.
If you have a high-deductible health insurance policy, you can contribute up to $3,650 in your health savings account for single coverage and $7,300 in your health savings account for family coverage. Those aged 55 and up can contribute an additional $1,000 to a health savings account.
7.In your 60s and beyond: Secure retirement plans
Your retirement is almost here, or you may already be enjoying it. A recession may cause you to change or postpone your plans for life after work.
8.Test-drive your financial plan
Check to see if your financial plan can withstand the strain of a financial downturn. Spend your next work vacation testing out your retirement budget. What would you do on a daily basis? How much money would you require to survive? If you can create a budget that works when markets are down and the economy is in trouble, you should be in good shape when things improve.
9.Protect your portfolio
Financial advisors frequently advise younger investors in their 20s and 30s to keep the majority, if not all, of their long-term investments in stocks because they have the advantage of time. Those in their 60s and approaching retirement, on the other hand, should be more conservative and add bonds and cash for a little more security. Diversification of taxes is also important. Having a mix of retirement assets in tax-deferred and tax-free accounts (traditional and Roth IRAs, 401(k) plans, or workplace accounts) as well as taxable accounts can be a wise strategy for greater flexibility as economic conditions change.