Most economists now expect the recession to impact US jobs and incomes by 2024. You’re not alone in changing your spending and savings to prepare. 74% of Americans prepare for the upcoming recession how they manage their finances. Economically vulnerable groups such as women, minorities and low-income workers feel even less prepared for the coming recession.
A recent Bankrate poll asked US adults if they were prepared for a recession by the end of 2023. These stats break down how different people try to tackle their budgets.
key money management statistics
47% of Americans spend less on discretionary purchases.
35% are saving more for emergencies.
30% are increasing their down payment on credit card debt.
24% are looking for additional or more stable income.
48% of all women surveyed feel unprepared for the recession.
In contrast, 38% of men feel unprepared for a recession.
53% of people earning less than $50,000 a year feel unprepared for a recession.
31% of US adults who feel unprepared for a recession are currently doing nothing to improve their economic situation.
13 ways to manage your money
No one can survive a recession, but there are things everyone can do to manage their money and create better peace of mind. Here are 13 accessible steps to create a money management plan and start saving for the future.
1. Evaluate your financial starting point
You can’t plan your finances unless you know your finances. Check accounts with available funds, such as checking accounts, savings accounts, and retirement accounts. Next, create a list of various debt sources.
Once you understand how much money and debt you have, you have a starting point. If your income is low, but you have a lot of debt to pay off, typical savings goals like a year’s worth of income by age 30 may be unrealistic.
2. Organize your invoices and due dates
Then list all your monthly expenses, from rent to internet to streaming services. List the due dates for each to make sure you pay on time or plan these withdrawals from your account if you have automatic payments set up. Write down infrequently paid bills, such as car insurance twice a year, including minimum debt payments.
This includes examples such as:
Rent, 1st of the month
Minimum credit card payment due on the 29th of each month
Amazon Prime membership ends January 1st every year.
3. Track monthly cash flow
Look at your typical month and tally up your monthly after-tax income, including side jobs and passive income. A household calculator helps you determine your monthly income. Then look at how much you’ve spent in the past month (you can do this after you’ve sorted out your bills and due dates) and subtract it from your monthly after-tax income to see your monthly cash flow. .
Knowing where your money is going and determining how much you have left will help you better understand your financial strengths and weaknesses.
4. Consider where you can cut spending
Managing your spending couldn’t be easier than ordering avocado toast. Think about what is important to you. Spending money on it is not really necessary. If you’re a movie buff, maintaining a streaming service might be more important than constantly buying new clothes.
These are common ways that anyone can cut spending.
Fix water leaks or replace light bulbs to make your utility more efficient
Plan meals and reduce food deliveries
Explore and compare phone plans and utility quotes
5. Set a realistic budget that works for you
When you’re worried about your budget, it’s easy to think about saving aggressively or cutting your discretionary spending altogether, but keeping a realistic budget is all about managing your money properly. Not only that, but it’s also good for your mental health.
The 50/30/20 budget is a popular budget template, but it doesn’t work for all financial situations. Whatever your bill, divide your spending into distinct categories. Plan to spend 50% on things you need, 30% on things you want, and 20% on savings or paying off debt.
6. Set short-term savings goals
When you start saving for short-term goals, start with small goals that you can reach in 6 months to 5 years. Choose specific and achievable goals.
Specific goals may include savings for:
3-6 months emergency savings
wedding
large vacation
Deposit for newly built condominium
7. Set long-term savings goals
Then visualize what you are likely to spend in the future. Set long-term savings goals that you won’t be able to reach in at least five years, but it’s important to start saving now. Keep in mind that as life changes, these plans may change, and you’ll need to adjust your savings accordingly.
Specific goals may include savings for:
retirement
your child’s education
student loan
mortgage repayment
8. Set up separate accounts for financial goals
Once you start moving your money into savings, we recommend opening multiple accounts, depending on your goals and when you need to spend the money. Setting up separate accounts allows you to know which funds go where and allows you to prioritize what matters. You don’t have to dive into new car funds for the holidays.
There are different types of savings accounts for short-term goals, and which one you choose depends on when you plan to use the funds and how much return you’re looking for.
Consider the following options.
high yield savings account
money market account
deposit passbook
9. (If applicable) Determine strategy for paying off debt
If you’re juggling private student loans, car loans, and credit card debt, paying it all off in the face of a recession can seem overwhelming. But there are ways to get out of debt.
Debt Snowball: Build momentum by paying off your debts from small to large, and be encouraged as you watch them fade away.
Debt Avalanche: Pay off debt from highest to lowest interest rates to stay ahead of interest rate increases.
Debt Consolidation: A personal loan or balance transfer credit card can help if you’re having trouble making timely payments, but the interest is higher.
10. Set up call forwarding
If you know your bills will pay roughly the same amount each month and your monthly income is steady, consider paying by direct debit. That way, you won’t have to adjust deadlines or worry about late payments.
You can set up automatic transfers from your bank checking account. Can be used for rent, insurance and other similar monthly bills. Check your bank statements regularly to make sure interest rates haven’t gone up without you noticing.
11. Always practice good credit habits
With good credit, you can open a new credit card, rent an apartment, or finance a car.
The best way to improve and keep your credit score high is to pay your bills on time and keep your credit usage low. Credit utilization refers to your credit card balance and credit limit and should be as low as possible. Use automatic transfers, pay your bills at the same time every time, and don’t apply for new accounts frequently.
12. Start saving for retirement if you haven’t started yet
Even if you are young, you should start thinking now about how to save for your old age. Common estimates say you’ll need eight to ten times his salary by age 67, but you can use the Retirement Calculator to get a more accurate picture of your lifestyle.
These are some of the most common types of retirement accounts.
A 401(k) that an employer can match.
A traditional IRA that can be deducted from income tax.
A Roth IRA allows you to make after-tax investments and receive tax-free income when you retire.
13. Set up a money management routine that works for you
Everyone has different budgets and priorities, and no financial advice is right for everyone. Allow your goals to adapt to you. You can set budgets and goals ahead of the next week, month, or whatever timeframe works best for you. At the end of each month, review your budget and look at your savings and spending as you adjust to meet your goals.
Developing healthy financial habits is difficult and may not happen overnight. But making these changes is the first step towards financial health that will set you up for years to come.
Frequently asked questions about financial management
How do I create a money management plan?
Organize your debts, income, and expenses to create a money management plan. Then set realistic goals to pay off debt and generate short- and long-term savings.
Do you have an app to manage your money?
There are plenty of apps out there that can do everything from tracking your savings to creating a budget.
Can I pay someone to manage my finances?
Hiring a financial advisor, such as a Chartered Financial Analyst or Certified Financial Planner, can help you manage your finances and build your investment.
methodology
Bankrate.com commissioned a survey from YouGov Plc to assess Americans’ sentiments towards a possible recession by the end of 2023. All figures are from YouGov Plc unless otherwise stated. The total sample size was 2,390 adults. The fieldwork was conducted from 27th to 29th July 2022. The surveys are conducted online and meet strict quality standards. We employed a non-probability-based sample with quotas in advance at collection time, followed by a weighting scheme in the backend designed and proven to provide nationally representative results.
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(Access Bankrate online at bankrate.com.)
©2022 Bankrate.com. Distributed by Tribune Content Agency, LLC.
