How to Overcome an Unpredictable Financial Climate
Economists have tried and failed for generations to create accurate predictions about what will happen next with the economy. If they were able to accurately predict its every move, then everyone would always know what to do with their money. The one thing that we can count on when it comes to the economy is instability. That is why it is important to build financial resilience to prepare for the possibility of economic instability ahead.
Here's what you need to know.
Economic Instability and Personal Finance
According to reporting by CNBC, 70% of Americans state that they feel stressed about their finances. The economic uncertainty of our times certainly has an impact on how individuals internalize their feelings about their financial situation. However, it is not just a psychological consideration to make, it is also true that economic instability causes real impacts on one’s ability to handle money. There are several ways that economic instability directly contributes to personal financial issues, including:
- Loss of Job
It is entirely possible that one might lose their job if the economy continues to remain shaky. Experts believe that job losses are on the way given the shaky economic situation that we are all facing down right now. Losing your primary source of income will clearly shake your entire personal financial situation.
- Increased Inflation
The rate of inflation in the United States hit new records in May of 2023 Similar rates (or worse) hit all over the world as well, and it has shaken the entire economic system all over the globe. The fact that people have to pay more for everything means that there is less money available for them to save for their future. It is something that troubles many people and makes them wonder how they can protect their financial situation moving forward.
- Reduced Consumer Confidence
As the economic situation starts to plummet, so too does consumer confidence. When people are less confident about their financial situation, they begin to spend less, and that contributes to a worsening economic picture as well. That can contribute to more job losses, and the cycle continues.
These are just a few of the things that can happen in an economically bleak time. Therefore, the connection between economic instability couldn’t be more clear. When the economy worsens, so too does your opportunity to make a better financial life for yourself.
“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.”
– Ogden Nash
Here's what you need to know.
Practicing Financial Resilience
Given that no one knows for sure what will happen next with the economy, it is best to insulate yourself from the worst possible outcomes. This is why you ought to think that the worst will always happen and be pleasantly surprised if it turns out that things turn out better than expected. To prepare yourself for the possibility that the economy will go sour, you should think about working on the following:
- Create an Emergency Fund
It is ideal to have between three to six months of expenses saved up in case something changes in your life or the economy. Those are funds that you can rely on to get you through if things get very grim. Check out our post on this very topic!
- Income Diversification
Losing your job is always a risk, and a highly concerning one, if you rely on a single source for all of the money that you have coming in. However, you can diversify your sources of income to create a better and more stable future for yourself if you wish to do so. Consider taking up some side gigs to better your chances of financially surviving an economic downturn.
- Spread Out Your Investments
Just like you need to diversify your income, you should also look at diversifying your investments as well. After all, it is also impossible to say which investments will be hit the worst during a downturn. Keep your money spread far and wide to ensure a safe experience overall with your investment portfolio.
You have options, and we're here to help!
Take The First Step to Financial Recovery
Keep yourself insulated from the worst impacts of an economic downturn. You want to avoid feeling the pinch of an economic downturn ruining your personal financial situation. For more information on how to keep yourself protected contact us for additional strategies.