No individual or business is immune to the consequences of economic ups and downs. The job market, the stock market, local housing prices, and a number of other economic factors can have a direct influence on your own financial situation, including your ability to reach your financial goals
During economic downturns or times of uncertainty, those financial goals can be threatened and even thrown off course. In spite of the challenges you may be facing, you can improve your own outlook by learning a few financial tips for times of uncertainty. Here are five tips to help you navigate this difficult period of time.
1. Don’t quit your day job.
Are you currently employed? Think twice before quitting your job to pursue another career path. Economic uncertainty means it could be hard for you to get a new job down the road. By sacrificing income now, you could be jeopardizing your long-term future.
If you want to go back to school or pursue other career goals, consider doing so on evenings and weekends and keeping your current income. If conditions improve later, you can always quit your job—but if the economy worsens, you might be glad you held on to your job and its financial security.
2. Increase savings and financial security by scaling back on luxuries.
Economic uncertainty doesn’t always affect you personally—at least not right away. But when this uncertainty starts to build, it’s often wise for individuals and families to be proactive in preparing for any potential impact they might experience.
Consider cutting back on nonessential expenses as a means of reducing your living costs and freeing up additional income to either save or invest. Cutting back on vacations, entertainment, and even your regular house-cleaner visits are all simple ways to reduce your liabilities without making dramatic changes to your life.
3. Add money to your emergency fund.
Economic uncertainty is a good reason to make sure you’ve got healthy cash reserves at your disposal. Even if you already have an emergency fund, it might be wise to respond to this uncertainty by increasing the amount of money in that emergency fund—at least temporarily.
Once the period of economic uncertainty is over, you can take the additional funds you’ve added and put them toward other goals. But if more serious types of disruption take place, such as a loss of income, you’ll be glad you built up some extra cushion to soften your fall.
4. Take advantage of lower rates and more attractive financial terms, if possible.
Saving up to buy a car or a house? Periods of broad economic uncertainty can actually work in your favor if your own finances remain stable. Auto and mortgage interest rates typically drop in the face of economic turmoil, so taking out a loan during this period can save you thousands in interest over the life of a loan.
Even if you’re only looking to grow the funds in your retirement account, investing during a down market allows you to essentially purchase investments at a discount. Experts caution against trying to time your investment purchases around economic downturns, but if you’re in position to buy low, you could quickly generate a large return.
5. Don’t beat yourself up if you have to adjust your plans.
In some cases, the impact of economic uncertainty may force you to pause or adjust your goals. If the above tips aren’t enough to help you move forward with your current financial goals, give yourself permission to put those goals on the back burner while you focus on more pressing needs, such as paying your bills and avoiding debt.
Economic uncertainty can be stress-inducing, but it doesn’t last forever. When financial disruption happens, change your strategy to account for these changes, and explore creative ways to use these new circumstances to your advantage.
For more tips on improving your financial security, check out our infographic, “4 Tips for Building an Emergency Fund Savings Account.”