How worried are you about the potential of a coming economic recession? Not worried at all? Slightly concerned? On red alert?
Regardless of your take on the current state of the economy and the other factors that may have caused the stock market to fluctuate in recent weeks, some say that we’re just flat-out due for a recession. Maybe that’s why a new study from MetLife states that about 17 percent of all adults over the age of 18 have been secretly stashing away cash in case the economy bottoms out. Furthermore, more than 20 percent of all respondents to the MetLife survey stated that they have been much more conservative with their spending lately.
Is Saving Your Cash BAD?
Look, it’s always good to have a rainy day fund or a nest egg of sorts on hand in case of emergencies, but stashing cash at home isn’t exactly the best way to maximize the return on investment from such. No, any cash that you’re storing in a safe, under your bed mattress, in a piggy bank, etc., is just losing out on the chance to accrue interest. Obviously, the more cash you have packed away, the more you have to lose with this.
So, what should you be doing with any excess money you stow away, whether you’re prepping for a recession or just trying to boost your savings portfolio? Let’s take a look:
How to Save for a Recession
A well-balanced portfolio is a great start, but there’s more to it than just that. Here’s a closer look at how to recession-proof your finances:
- Have an emergency savings account: You never know what might happen in a recession or just in life in general. It’s why most financial planners recommend that all Americans have an emergency savings account with at least 3 months worth of living expenses accounted for. If you have a more specialized job that’s not in demand, you may even want to stow away more than just 3 months worth of expenses to give you more of a cushion to find work if you’re ever in a position where you’re laid off or out of a job.
- Cut back on your spending: A little less than half of all Americans admit that they’re living paycheck to paycheck. It’s an understatement to say that this isn’t ideal, and you don’t need the threat of an economic recession to whip your finances into shape. So what can you do? Start by tracking everything that you’re spending money on each month, then eliminate what you don’t need, think about any luxuries or extras that you’re regularly paying for and try to cut back on the splurges. When you can live below your means, you’re able to put money toward other things, like your portfolio or the aforementioned emergency savings account that we mentioned above.
- Don’t stop investing: Remember, your portfolio is a marathon, not a sprint. Noting this, don’t make knee-jerk reactions and sell off stocks or withdraw money from certain accounts when things go south. A well-balanced portfolio is designed to deal with ebbs and flows, and while it may take a hit during an economic recession, it’ll also likely rebound nicely when the economy is back on the upswing. Additionally, keep allocating money toward your retirement accounts and stay the course with any long-term strategy you’ve developed.
Don’t Wait for a Recession
You shouldn’t need the threat of a recession to get your finances in order — it should be something that you’re already doing. And if you’re doing it right, you’re only going to be that much stronger and in that much better shape when the economy inevitably goes south, whenever that is. Recessions are bound to happen from time to time, and while we hope the next one isn’t nearly as bad as the last one, it’s how you prepare that can make all the difference.
So, are you going to be the type of person that is hiding cash around your home in preparation for what might be coming? Or, are you going to get your finances in order so you can hit any recession or difficult personal time head-on? Why not start now?