Can Your Family Finances Survive a Global Recession

• (Photo : Can Your Family Finances Survive a Global Recession)

The odds of a global recession mount every day. The unprecedented scale of the economic shutdown currently in place across much of the world means that there are currently millions of people who have been furloughed or lost their jobs entirely. Small businesses are closing in alarming numbers around the world, and that means fewer jobs remaining when the economy reopens.

Are you prepared to protect yourself financially from the coming global recession? Much depends on your financial situation, whether you and your partner are still working, and what government supports are available to you.

Nevertheless, there are steps you can take to recession-proof your finances and deal with anything that might come your way.

#1 Get Out of Debt

Going into a recession with debt can put you in a precarious position. Income loss means you'll quickly start missing payments, and that can lead to aggressive collection actions from your creditors. Even if your debt is overwhelming, you can get help with a debt consolidation loan or credit counselling. You may be able to negotiate lower or zero interest rates with your creditors, allowing you to catch up on payments.

Getting out of debt also gives you a chance to save. High-interest debt is a higher priority than saving because it costs more than what your savings generate. Once you've cleared your debt, you have a chance to build up an easily-accessible emergency savings fund you can draw on in times of need.

#2 Cut Back Expenses

What unnecessary expenses have you made a regular part of your budget? Many households are signed up for a lot in the way of streaming services, phone plans, cable, etc., and some of them may be redundant. Cutting back on some of those services can help you prepare for job insecurity or loss of income. Even if you're still working, cutting back those services will help you save in case something should happen. 

#3 Evaluate Your Investment Strategy

When a recession begins, it's already too late to change your investment strategy. If you're over-exposed to stocks, one of the worst moves you can make is realizing those losses. You're better off waiting for the recovery. However, recessions are a great opportunity to buy. The dip in stock prices sets you up for later growth.

An easy way to take advantage of market cycles is making regular, automated contributions. For investors coming up on retirement, it makes sense to get ready before a recession, and have expected withdrawals already in cash or another liquid asset.

#4 Access Credit & Government Supports

Households that have lost employment or income due to the shutdown are being hit hard, but there are supports available in many places. Accessing these supports can help pay for essential expenses. If there is still a gap to fill, it may make sense to use a line of credit. A line of credit is a type of revolving credit with no due date to be repaid; you simply have to keep up with interest payments.

The current recession is a rare shock and the circumstances are exceptional. If there was ever a time to use an emergency fund, it's now.