If you want to be able to get through the current recession that is rocking the United States due to COVID-19, you need to be taking steps that will help you protect your financial stability. Many of these are long-term steps you should consider engaging in.
Tip #1: Find a Financial Advisor
The first thing you need to do is find a financial advisor. Just like you turn to a doctor to help you take care of your physical health, you should also turn to a financial professional to help you take care of your financial health. A fee-based financial advisor is someone who you pay directly for the services they provide you with. They can help you make smart investment decisions, and they can provide you with assistance in setting smart overall financial goals.
Tip #2: Create an Emergency Fund
Many people prioritize paying down debt or other financial obligations over creating an emergency fund. However, this is a mistake. Without an emergency fund, if you lose your job, you will not have money to continue to pay your bills, including your debt. It will not matter that you paid your auto loan balance down if you are not bringing in any money. An emergency fund is there to help you if you get laid off or if you experience another financial emergency, such as a broken-down car.
You should put money into your emergency fund every month. Start by building up one month of expenses in your emergency fund, and work to expand it until you reach a point where you could take care of a year's worth of expenses via your emergency fund.
Tip #3: Pay Down Debt
After you have started an emergency fund, it is important to start paying down debt. The less debt you have, the fewer bills you must pay. Paying down debt can help you get through a drop in your income.
There are many different tactics for paying off your debt. You can do the snowball effect, where you pay off your smallest debt first and then move onto your next largest debt, while also moving the money you were paying from the paid-off debt to the new debt. Or you can pay off your highest interest loans first. Or you can pay off a certain type of debt, such as your car loans, and then move onto other types of debts. The key is to find a method that works for you and allows you to eliminate debts, so you have fewer bills to pay.
Tip #4: Make Smart Investments
You should not stop investing. You should consider investing in smart stock options and in things like high-yield savings accounts and bonds. Regardless of the economic situation, it is important to be using your money to grow your money. You should be making investments in both your retirement fund and outside of your retirement fund.
Recession-proof your finances by working with a financial advisor. Create and build an emergency fund first then work on paying off debt to lower your monthly bills and obligations. Continue to make smart investments inside and outside of your retirement fund with the help of your fee-only financial advisor.