Top 12 Financial Tips that we Can Learn from Previous Recessions
12 Financial Tips that we Can Learn from Previous Recessions
COVID-19 has changed the way we act and react to the world. Countries have locked down and the economy has suffered. With millions of people out of work and struggling to keep up with rising rent and bills, it is a comfort to know that this is not the first time the economy has crashed; nor will it be the last. Here are some tips from previous moments of economic instability that we can use and adopt to our present circumstances so that we can come out of this pandemic stronger and more financially stable.
1.) Emergency Funds are for Everyone
If you are making 30K a year or even 150K a
year, I promise you that an emergency fund is a necessity that will help you
sleep at night when things go wrong. As those once in a lifetime situations
occur, the COVID-19 pandemic too many by surprise. Those who lost their income
and had built an emergency fund, a fund where you hide money away for a rainy
day, were thankful for a little bit of income to tide them over to their next
job or to help bolster the income they received from the government. Although
the government responded to the crisis by providing additional income weekly to
the unemployed, a well-maintained emergency fund can help you survive without
going into debt and without needing, if you are older, to dip into your
retirement savings as this money has also taken a hit. There is nothing worse
than needing to cash out investments when they are at all-time lows and you are
getting pennies on your dollars. This is why having an emergency fund, usually
3-6 months of expenses, is a necessity so that when times are good, you can
build it up strong, and when things go bad, you can weather the storm without fear
2.) Stick to your Debit Card
As money becomes less and less used because
of public health officials recommending that it might not be clean and helps to
transmit germs from one person to another, it is better to use your debit card,
not your credit card, so that you can stick to your budget. It is very easy
during a financial crisis to start using your credit to help pay bills, but
that will affect you long-term. Rather than credit, if you only use your debit
card, and use money that you currently have, it will be easier to stick to your
budget, as you will only spend money that you have and help cut down on
unwanted costs. Also, by not using a credit card, you can avoid those
high-interest rates that will definitely take a chunk out of your income.
3.) Making a Budget
When something as crazy as a pandemic hits,
those who have been budgeting and using their budgets to reduce their costs and
increase their savings become financially safe and can weather the storm
without fear. But for the rest of us, if you have lost your job or your source
of income, it is important to take some time now and examine your spending habits.
Is there anything that you can cut out completely? Can you negotiate your rent
with your landlord? Maybe you don’t need a second car as you are not currently
travelling to work everyday. Even if you are employed, it makes sense to take
the time to go over a basic budget to prepare for the worst-case scenario and
to make sure that there are not any unexpected surprises that sink you.
6.) Find a Side Hustle
9.) Fishing and Scamming
As were all stuck at home, with less activities
to keep us busy, this pandemic has been the perfect breeding ground for
scammers and tricksters alike. There are many people who are using this pandemic
to their advantage by fake calling as the IRS (CRA in Canada) and/or credit
card and insurance companies to get private information so that they can access
your bank accounts and other confidential information to make some quick money.
As we are worried about our current situation, it is happening more often that
people are falling to these traps as the fear of getting in trouble or
defaulting is higher during a recession than it is during a boom. So be wary of
these calls and make sure you double check yourself before giving any personal
information on the phone.
10.) Monopoly and Recessions
Most people don’t realize this but monopoly
became very popular due to the Great Depression. This is because during
recessions, people don’t have the disposable income to buy multiple games or
entertainment options to keep themselves and their families busy. But monopoly
did very well because it was a fairly simple game to learn and often took hours
to complete a single game. This allowed families to play over a course of many
days the same game without getting bored. Nowadays, board games are less the
norm but the process remains intact: Netflix, for a low cost, can provide you
and your family with hours upon hours of entertainment for a small monthly fee.
Rather than spending lots of money or activities that might not last longer
than a week, Netflix or even monopoly is a great way to pass the time!
11.) Learn to Cook Inexpensively
During recessions, its important to find
ways to reduce your spending so that you can save money or put more money
towards debt. One way people can successfully do this is by buying in bulk as
places like Costco for goods that they know they will use (such as rice, pasta
and toilet paper) or by learning how to cook with less expensive ingredients.
Taken from stories about cooking during the Great Depression, many families
learn to eat on reduced budgets by making food with ingredients that were in
season and less expensive and to avoid eating meat and dairy products that had
higher than normal prices. Others took the time to eat and make meals out of
whatever canned foods they currently had in their pantries as many people
purchase food throughout the year but never end up eating them as they age in
the back of the pantry until they are no longer edible. Take the time to clean
out your pantry and make sure to put those ingredients to good use!
12.) Becoming Bob the Builder
We all know things break at the wrong time
and the unanticipated expense of having to pay a carpenter or a plumber to come
fix an issue is high. Rather than waiting for an issue to happen and be forced
to pay a steep price, take the time during quarantine to learn how to fix
things around the house rather than calling a handyman. With resources like YouTube,
it has never been easier to learn how to unclog a toilet or how to change your
oil in your car. If you have temporarily lost your job, it is worth taking some
of your free time to learn skills so that the next time something breaks in
your house, you can take care of it yourself without having to invite an
unknown person in your home.
What would you add to this list? Do you find that some of these tips are better than others? Let me know down in the comments!