Staying out of debt in times of good economic health can be difficult for some and staying out of debt during a recession for many can be nearly impossible. Even if you feel financially stable today, you never know when you might get hit by a curve ball, sending you into financial misery.
Your best defense is to be prepared for anything and to always make sure you are using a budget worksheet to help keep your finances in good shape. Here are some great tips to help you stay out of debt during a recession:
Set A Monthly Budget
While this is an easy, critical step many people simply skip it. If you want to avoid debt during a recession you will seriously need to set up a monthly budget. You can get started by using a simple budget worksheet. Determine your income and then subtract from that all of your current expenses. If your expenses are more, then you need to start cutting what you spend.
Eliminate Unnecessary Expenses
Even if you can still fit them in your budget, during times of a recession it is best to be proactive and heed on the side of caution. This means taking a very close look at any expenses you have that just may not be necessary. Can you eat out less, make your own coffee instead of picking it up on the way to work, reduce your cable tv bill, cut your house phone, eliminate the gym membership, etc. Making a list of all of your “unnecessary” expenses may be helpful. You may find that some things on your list are very easy to cut.
Don’t Make Big Purchases
Another proactive approach to avoiding debt during a recession is to not make big purchases. This might include things like purchasing a new vehicle, buying a new big screen television, purchasing a new computer, etc. Do what you can to fix what you own and keep it working.
Pay Down Existing Debt
During a recession and really at any other time you should always be working to pay down any debt you may already have. This can include credit card debt along with other debts like a car payment, home mortgage, etc. The less debt you have, the better off you will be if you were to get hit financially during a recession.
Find Additional Income
During a recession, especially if your hours at work have been cut or your salary has been decreased or you have lost your job altogether, you may need to look for another source of income in order to stay out of debt. Do you have a skill you could turn into a part or full time job? Could you sell big ticket items like a motor home, a jet ski or other items you may not really need? Can you just clean out your house and have a yard sale? Be creative and you never know what you might be able to come up with to bring in some extra funds.
Skip The Expensive Vacation
A final tip is to skip the high priced vacation. Instead, look for a more economical option. Drive instead of flying, take along some of your own food or even consider a “staycation”, staying at home and taking in the local sites.