15 Ways to Prepare for Economic Uncertainty - 401k Maneuver

15 Ways to Prepare for Economic Uncertainty

Gas prices have recently gone up. And it won’t be long until other goods will start to rise in price. 

Between the economic effects of the pandemic and the stimulus packages, economic forecasts are all over the map. 

Before we dive in, we want to make it very clear that we are not predicting economic uncertainty, and remain optimistic. However, we understand the importance of preparing for economic ups and downs because life will never go according to our plans – even the best-laid plans. 

According to Kathy Jones, head of fixed income for Charles Schwab, “[The Federal Reserve’s policymakers] have been pretty honest and straightforward about the high level of uncertainty that they see around how the economy’s progressing.”¹ 

But what does that mean for you and me?

It means we need to take steps to prepare for economic uncertainty.

We are currently experiencing a once-in-a-lifetime pandemic. Those who live in Texas recently experienced a once-in-a-lifetime winter storm.

No matter how well we plan our future, we may still face periods of financial upheaval outside of our control – whether caused by natural disasters, personal losses, or government failures.

Which is why it is wise to prepare for economic uncertainty.

Those who do will feel empowered rather than fearful as they listen to talking heads discuss America’s financial future.

Keep reading for 15 steps to take today to prepare for economic uncertainty.

#1 Stock Up on Supplies

prepare for economic uncertainty

During times of uncertainty, people panic shop. As a result, grocery shelves are empty of essentials.

And when this happens, the supply and demand of these essentials can lead to inflation.

Rather than waiting until you can’t find what you need in the stores or paying significantly higher prices, stock up on items that will be in demand and have a long shelf life.

Here are a few items to stock up on to prepare for economic uncertainty:

  • Toilet paper
  • Household paper products
  • Sanitary items
  • Coffee and tea
  • Cleaning supplies
  • Canned goods

#2 Reduce Spending

prepare for economic uncertainty

Take a good hard look at your spending habits and see where you can make some cuts. Truth is, many Americans have made a habit of unnecessary spending.

Do you really need subscriptions to four different streaming services? The answer is No.

Don’t throw your money away. One day you may need it. 

Reducing unnecessary spending today can make a big difference in the long run, especially if you take the money you save and put it toward savings. 

#3 Build Up an Emergency Fund

prepare for economic uncertainty

It is critical to build up an emergency fund if you want to prepare for the unknown.

According to a 2020 survey by the American Payroll Association (APA), “More than 74 percent of employees in America would experience financial difficulty if their paychecks were delayed for a week.”² 

Not only are most Americans living paycheck to paycheck, but many don’t have money for emergencies.

Bankrate claims, “Nearly three in 10 (28 percent) U.S. adults have no emergency savings […]. One in four have a rainy day fund, but not enough money to cover three months’ worth of living expenses.”³ 

Just take a look at the devastation the sudden February snow storm wreaked on Texans’ and Oklahomans’ wallets to see why an emergency fund is a must.

One way to quickly fund your savings is to use the money saved from cutting unnecessary spending. You’d be amazed how quickly you can accumulate cash doing this. 

#4 Focus on the Future

prepare for economic uncertainty

Another way to prepare for economic uncertainty is to focus on the future. Think about your long-term retirement goals and take action now.

Look over your retirement plan and see what steps you can take that may help you still retire as planned (such as increasing retirement contributions).

Seek professional guidance for your future.  

#5 Diversify Your Income

prepare for economic uncertainty

As evidenced by the events of 2020, we can’t depend on one income source. We watched as millions of Americans suddenly lost their jobs in 2020.

As a result, two million Americans started freelancing during the pandemic.⁴ 

These individuals found a way to bring in income on their own terms. And the gig economy is paving the way for Americans to diversify their income.

According to Forbes, “Roughly 57 million Americans currently engage in some type of gig work that contributes more than $1 trillion to the U.S. economy.”⁵ 

Whether this is driving for Uber or grocery shopping for Shipt, Americans have empowered themselves financially with side hustles. 

[Related Read: Close the Gap on Financial Goals with a Side Hustle]

#6 Commit to Financial Literacy

prepare for economic uncertainty

Possibly the best way to prepare for economic uncertainty is to educate yourself.

prepare for economic uncertainty

Financial literacy and financial planning go hand in hand.

Charles Schwab’s May 2019 Modern Wealth Survey found, “Planners demonstrate better money and investing habits […] For those looking for a way to stay the course, Schwab’s survey shows that more than 60 percent of Americans who have a written financial plan feel financially stable, while only a third of those without a plan feel that same level of comfort. Those with a plan also maintain healthier money habits when it comes to saving.”⁶ 

401(k) Maneuver has a wealth of information to help you grow in financial literacy, including:

#7 Reduce Debt

prepare for economic uncertainty

Another way to prepare for economic uncertainty is to get your debt under control. Now. 

Debt during times of financial upheaval can make you feel even more unstable because each debt is one more monthly bill to pay.

As you eliminate debt, you can say goodbye to monthly payments, build up your savings, and hopefully sleep more soundly at night.

This is a way to alleviate additional financial pressure, which you do not want to have when the economy is uncertain. 

#8 Plan Accordingly

prepare for economic uncertainty

Financial planning starts with a budget. And budgeting is the key to preparing for economic uncertainty.

When times are good, it is easy to spend a little more. But, when times are hard, you need to rein in your spending.

A budget helps you stay the course. 

Create a budget according to your income and expenses, and use it to support your spending and saving goals. 

Budgeting teaches you to live within your means and prioritize saving, both of which are critical when the economy takes a nosedive. 

#9 Establish Good Financial Habits

prepare for economic uncertainty

Creating a budget is a healthy financial habit, but it is not the only one.

Another way to prepare for economic uncertainty is to pay yourself first.

You do this by making saving your norm, such as automating savings and 401(k) or IRA contributions.

Set up automated bill payments so you never get behind. 

#10 Invest in Yourself

prepare for economic uncertainty

Don’t get complacent. Look for opportunities to invest in yourself and boost your resume, such as learning new skills.

Find ways to make yourself an asset at your workplace so your employer will view you as irreplaceable. 

#11 Find Low-Cost Leisure Activities

prepare for economic uncertainty

With the uncertainty in the economy, now is not the time to take on expensive hobbies or indulge your luxury tastes.

Instead, find low-cost leisure activities you enjoy, such as hiking.

The less money you spend today, the more money you can save for emergencies.

#12 Take Advantage of Work Perks Now

prepare for economic uncertainty

Again, we don’t know what the future brings, but we do know that recessions lead to layoffs.

So, it is wise to take advantage of the work perks you have today.

If you need medical procedures that are covered by your company health insurance plan, schedule them now rather than later.

MarketWatch also recommends, “Use up other company perks while you still can as well. Gym reimbursement? Education and training assistance? Company discounts on things you want to buy? There may be all sorts of benefits and perks lurking on your organization’s human resources portal. Use them before you lose them.”⁷ 

#13 Cut Interest Rates

prepare for economic uncertainty

If you have high-interest rates on credit cards, see how you can save money on interest payments.

See if you can transfer your credit card debt to a different card with a lower rate. 

#14 Communicate with Your Family

prepare for economic uncertainty

As you prepare for economic uncertainty, you need everyone on board.

Be open and honest with your partner about your financial situation and your plan.

You can’t save for emergencies if those spending from your bank account aren’t aware of the plan. 

[Related Read: Family Financial Planning: Why Awkward Money Talks Are Necessary]

#15 Don’t Panic 

prepare for economic uncertainty

Lastly, don’t panic.

With the economy in flux, it is easy to grow fearful.

But you shouldn’t make financial decisions based on emotions or fear.

Instead, prepare for economic uncertainty by making wise financial decisions every day – not just when the market is volatile.  

We regularly post videos with financial information and updates. Check us out on YouTube.

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Sources: 

  1. https://www.cnbc.com/2020/06/12/feds-economic-forecasts-are-all-over-the-map-a-sign-of-how-uncertain-these-times-are.html
  2. https://www.prnewswire.com/news-releases/survey-finds-majority-of-americans-live-paycheck-to-paycheck-300915266.html
  3. https://www.bankrate.com/banking/savings/financial-security-june-2019/?mod=article_inline
  4. https://www.upwork.com/documents/freelance-forward-2020
  5. https://www.forbes.com/sites/rebeccahenderson/2020/12/10/how-covid-19-has-transformed-the-gig-economy/
  6. https://www.aboutschwab.com/modernwealth2019
  7. https://www.marketwatch.com/story/brace-yourself-take-these-10-steps-right-now-to-prepare-for-a-recession-2019-08-21
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