When it comes to managing money this year, it might feel like the sky is falling. Over two-thirds of U.S. economists believe we're headed for a recession in 2023, according to a recent survey by The Financial Times.
Recessive climates are indeed a scary prospect, even though it's part of a normal economic cycle. You might suppress the urge to run for cover, stuff all your cash under a mattress, hit the "pause" button on your money goals and pinch pennies until things blow over. But here's some good news: While it's wise to be watchful over your money, you don't have to halt your savings goals during recessive times.
Here are eight ways to recession-proof your money and continue saving:
1. Find Ways to Save on the "Big Three"
The first step in preparing for a recession is to scale back your spending. Find ways to shave some dollars from your budget's three most significant living expenses—housing, food and transportation.
According to the 2020 Consumer Spending Expenditures released by the Bureau of Labor Statistics in the fall of 2021, 34.9% of one's household income goes toward housing. Food comes in second, with 11.9% spent on dining out and groceries. The next most ravenous money-gobbling culprit? Transportation, where 16% of household income goes. In fact, between February 2021 to February 2022, gas prices shot up by almost 40%, according to the Urban Institute.
If you're looking to cut costs on these big three items, dramatic lifestyle changes can be potentially worthwhile. While they require a greater commitment, they can also offer more significant savings than simple, everyday tweaks. For instance, downsizing from a two-car to a one-car family or uprooting to a less-expensive part of the country could net thousands of dollars of savings a year, if not more.
These changes in your lifestyle not only need to make financial sense but be a good fit for you. Be mindful of not making dramatic shifts that could lead to feelings of deprivation and regret.
2. Review Your Automated Subscriptions
Easy wins shouldn't be overlooked. These are small, one-time moves that can result in long-term savings. For instance, dropping a $20 monthly subscription means $240 goes back into your bank account.
Fun fact about subscriptions: A recent survey by C+R Research reveals that when asked how much they spend a month on subscriptions, consumers said $86 a month. The actual number, however, was $219—which is $133 higher than survey respondents originally thought.
Even if you think you can't cut back any further on your subscriptions, make sure no stone goes unturned. Those weekly meal kits, beauty boxes and streaming subscriptions add up quickly. We might be guilty of setting up a subscription on autopilot and forgetting about it.
To cut back on these easy wins, go through your past bank and credit card statements, and pour over how much you spend each month. Then, drop or downgrade what you don't use.
3. Crush Your Debt
Rising interest rates mean your debt is likely costing more. See if you can knock down your debt more aggressively to stave off paying off more interest fees. The first thing to check off your debt payoff to-do list: Make the minimum payments on all forms of debt. Then, focus on high-interest debt such as credit cards. Paying off your credit card balance can net more considerable savings. Two popular debt payoff methods are the avalanche and the snowball method:
Snowball method
The snowball method helps you stay motivated by focusing on the debt in the smallest amount. Once the first debt is paid off, you pay the debt in the next-highest amount.
Avalanche method
The significant benefit of the avalanche method is that it will help you save on interest. Start by aggressively paying down the card with the highest APR (which is the annual percentage rate—meaning how much you're paying in interest). Then, move to the card with the next-highest APR.
Let's look at an example. Hypothetically, let's say you have three credit cards with balances:
- • Credit card #1: $500 balance with 22% interest rate
- • Credit card #2: $1,000 balance with 17% interest rate
- • Credit card #3: $1,500 balance with 20% interest rate
First, make the minimum payments on all your cards. If you're tackling your high-interest debt with the snowball method, you pay off your credit cards in this order: cards 1, 2 then 3.
If you're using the avalanche method, you pay off your cards in the following order: 1, 3 and then 2.
Second, look into ways that can lower your interest rates, which might include:
- - Debt consolidation. When you consolidate debt, you roll your high-interest debt (i.e., credit cards, personal loans) into a new loan, typically at a lower interest rate.
- - Balance transfer credit cards. This tactic involves moving your debt to a balance transfer credit card that offers a 0% or low-interest introductory interest rate.
- - Debt management plan. A debt management plan involves working with a third-party, such as a credit counseling organization, that bundles your debts into a single payment. The third-party might also negotiate with credit card companies on your behalf to bump down your interest rate.
Another option: Call up your credit card company and ask about getting a better interest rate.
4. Re-Evaluate Your Employment Situation
Layoffs can and do happen, especially during recessive climates. If you're gainfully employed, have a backup plan in case of layoffs. Refresh your resume and find ways to expand your professional network.
You don't necessarily need to spend a lot of money paying for networking events and professional conferences. You can make new (and sometimes free!) connections on LinkedIn, Lunchclub and Alignable platforms. And don't overlook the power of social media. You can deepen professional relationships on platforms such as Instagram and Twitter.
5. Think of Ways to Boost Your Earnings on the Job
The other side of saving is raking in more cash. Look for ways you can earn more in your current role. Can you take on a worthwhile project that adds value to your work? Come performance review time, highlight your contributions and position yourself for a promotion or raise.
Also, consider investing in your education. Put on your continuing education cap, take an online learning course or enroll in evening classes at the community college or university extension program. No matter what lies ahead on your career path, give your resume a polish. It can help open new professional doors and lead to exciting, lucrative opportunities.
6. Take on a Side Gig
Put the money you make from moonlighting to boost your savings goals. According to a recent survey by Side Hustle Nation, the average side hustle rakes in $1,122 a month—a hefty sum that can help pay bills. Are you spinning a bunch of plates financially? Then commit to set aside a portion of your side hustle earnings toward your savings.
If you're squeezed for time, look for gigs that require low commitment and few resources to get started—for instance, delivering groceries or selling unwanted belongings that have been lurking about and stuffed in closets and corners in your home.
7. Pay Yourself First
Pay yourself first to ensure all your efforts in cutting costs and earning boost your savings. This means that, before all else, tuck away funds for your savings and debt goals. Then, you can confidently spend the rest on your fixed expenses and whatever else you please.
One way to make it easy is to create an automatic savings plan, which helps keep steady with your savings goals. For instance, if you want to save $5,000 within six months, aim to tuck away a little over $800 a month or $200 a week. And in no time, you'll hit your goal.
The beauty of automatic savings is it's a “one-and-done" deal. Set it up once and it's like a machine humming gently in the background, doing the work for you. With Synchrony Bank, you can set your savings goals on autopilot with Auto Deposits. You can automate transfers into your savings account and track your progress.
8. Look for Ways to Earn More on Interest
Beyond a traditional savings account, explore different types of compound interest accounts to park your money and rake in more on interest. With interest rates climbing, it's a great time to consider your options.
For instance, a high-interest savings account typically offers higher interest rates than the national average. And if leaving your money in an account for a more extended period—say, more than three months—bodes well with your money goals, then a CD account can also bolster your interest earnings.
Synchrony Bank offers high-yield savings accounts and various CDs with attractive interest rates and features.
The Bottom Line: Staying Proactive is Everything
Even though it's a normal part of economic cycles, a recessive climate can be stressful, scary and tricky. But staying on course with your savings is possible. By rolling up your sleeves and making smart money moves, you can move at a steady clip with your financial goals, no matter what's happening in our economy and the world at large.
LEARN MORE:How to Make Your Retirement Savings Last in a Period of Inflation
Jackie Lam is an L.A.-based money writer whose work has appeared in Salon.com, Refinery29, Business Insider and BuzzFeed, among others.
