 |
| When the next recession hits, how will you cope with financial setbacks? Nicklewise has a few ideas. |
All the signs of the next recession happening are almost in place. Some people say it's already happening in parts of Europe. South America is not enjoying a boom time. It doesn't matter if you blame the trade war between the U.S. and China or wars in the Middle East. People and companies are spending less money today than they were only a few months ago. A recession could be mild or really bad. Either way, if it affects you then you won't have many resources to fall back on.
Thank the Republican Party for destroying the social safety nets that helped people out of the Great Recession. Political conservatives and their "small government" philosophy act like we don't need spend any money on the citizens. All they want is to help billionaires become wealthier.
All politics aside, what can we do if we lose our jobs or other income? Obviously you'll cut back on paying bills. You'll also look for more work. But what do you do if you cannot cut expenses or find more money?
Start by Assessing Your Credit Record
Look for problems you can fix now before you have other problems. Your credit will take a hit when you lose your job. Banks will cut back on your credit limits or cancel your cards.
Hold off telling them you're unemployed for as long as possible. As soon as they know you're earning less money they'll start protecting themselves at your expense.
If you can pay off small credit card balances now and keep those accounts open, your credit history will improve. Having more available credit you aren't using is important.
Remaining current on as many bills as possible is also important.
You can rebuild your credit even if it falls 100 points. But falling from a higher score is better than falling from a lower score.
Look at What You are Paying for Rent
If you can move to a less expensive home, you should do that. Allowing for safety and convenient location, if you can cut your rent by 20-30% a month now is the time.
I've broken leases with a few landlords when I had to take another job. They hold you to your lease agreement but if you're on the hook for 1-2 months' rent you can pay that off over time.
Also, getting out of an expensive apartment or rental home is easier when people are still working than when a recession hits. Fewer people will look for new homes during a recession. There won't be as many job changes.
If your landlord can lease out your old apartment or house now, you may not have to pay those extra rent months.
Change Your Car Payment
If you're still making a car payment set up by your dealer, talk to your bank or credit union about refinancing it. You should be able to do this if you've made regular payments on a new car loan for at least 2 years. You could lower your payments by $100 a month or more, depending on what you're paying now.
People who don't commute very far to work and put less mileage on their vehicles can get better value for their cars when they still have low mileage.
If you're thinking about buying a new vehicle now may not be the best time. But if you must, don't buy a new car. Check out the certified, pre-owned lots. These vehicles have already been depreciated and won't lose value as quickly as new cars. The loans should also be less expensive.
But don't put this off. Demand for used cars is rising. Demand for new cars is falling. People have figured out they cannot afford these expensive new SUVs with payments running to $600 and $700 a month.
It's stupid to pay that much for a car loan.
Refinancing a car loan has another advantage that can help you in a recession. You won't have a record on this loan of asking for deferments. More banks are willing to reschedule 1-3 loan payments for customers who have financial difficulty. But they are less likely to do this for a loan that you've already rescheduled.
Payment deferrals don't go on your credit record. You can buy yourself some time with a refinance loan that allows you to skip a payment in-between paying off the old loan and starting the new loan. And then you'll have the option of asking for emergency deferment if you lose your job.
Start Looking for Another Job Now
If you don't know how your company handles recessions, ask. Don't be shocked if you're working for a new company that is too young to have a history of surviving the last Great Recession. But if someone at your company can tell you how they fared through the last recession, you may have a better idea of whether you should be looking for a new job.
The first place I'd look is for other positions in the same company that have a better chance of surviving cost cutting measures in a recession. You're already in the door and they'll appreciate your loyalty if you apply for an internal job first.
If you decide you should consider changing jobs and employers, then look for companies that do well in recessions.
Unfortunately if you look for lists of "recession-proof jobs" you'll mostly find articles that list professions requiring special skills and training. That won't help you if you don't have the right skills and education. Many college-educated people cannot find jobs during recessions because there is no demand for their education, skills, and experience.
Starting a side gig to get in the door can help you. You'll find that some industries with low entry requirements still do well during recessions. Begin transitioning to a new job now, while you can, by acquiring the skills and experience that will serve you best.
Don't Despair - You Can Do This
I'm not saying it will be easy but if you think about where you want to be during a recession, making a few steps in that direction can be good for you.
If the recession comes and you see you'll keep your current job you might still be able to help someone else. Keep an open mind about job openings in your area, in your company, and in industries that you think you'd like to try.
You may not need those opportunities but you'll probably know someone who falls on hard times. Be there for people when they need you most and they'll return the favor when they can.
And it's the right thing to do.
