For many, a recession is a time to cut back on spending and live a more frugal life. There are additional tips, however, that you can use to help weather the storm of a recession. Below are some ideas to help you better manage your finances during a recession.
1. Do your budget post-tax, not pre-tax.
2. If you get a tax refund each year, cut back your withholdings. This ensures that your money stays in your hands instead of sitting in government coffers. For example, many cash strapped states are delaying tax refunds so that they can use funds to tide over their budgetary problems.
3. If you have any other deductions on your paycheck, look at what you can drop. Disability insurance should be dropped if you have trouble making rent. Drop vision insurance if you haven't gotten new glasses in three years. Any extra perks like discounted gyms or extra life insurance riders should also be dropped.
4. If you save money by having a high deductible insurance, be it home or health insurance, be sure to have that deductible in a savings account that you don't touch.
5. Living off of savings is free. Living off of credit cards costs you interest and negatively affects your credit score. Save a little bit of money each month to prepare for job loss, so that you have a cushion should you need it.
6. When you create your budget, create a pie chart displaying what portion of your money goes to each area of expense. This visual reminder of where your money goes can give you motivation to cut expenses. It also works wonders for explaining to children, teenagers, and perhaps even spouses, why you don't have money for their requests.
7. If you cannot afford the basics, you cannot afford the luxuries. Be honest with yourself about what are necessities.
8. If you are falling behind due to a sudden drop in income and have mandatory payments, contact a lawyer as soon as possible. If you fall behind on your child support, you may have to go to court. Depending on where you live, you have 30 to 90 days from an adverse event to get alimony and child support adjusted. If you lose your job, call your lawyer as soon as possible to get support payments adjusted.
These are just some quick tips to help you survive job loss and lowered income. If you are smart about your situation and manage the money that you do have well, there isn't any reason why you can't ride out the storm and come out a better money manager as a result.