By Jerry Mooney

No one wants to be forced into a situation where they have to live differently and frugally. But we can all suffer tough financial times at some point in our future. And it’s always tempting to ignore the possibility of this happening to us. We imagine it as something that just happens to other people. Then we carry on with our lives, enjoying the good times. However, there are all kinds of mitigating factors that can have an impact on your life and your family’s lives too.

 

For example, harsh economic conditions can hit families hard. Would you be able to deal with a financial recession or even a depression? Nobody sees these economic trends coming until they’re already here and causing havoc. But it’s still vital to be fully prepared for them. And what if an economic change led to you losing your job? How would you deal with that? So, while the times are good for you and your family, you should be thinking about how you can prepare for the tough times. If they never arrive, then it doesn’t matter. But if they do, and you’re not prepared, how would you cope? Here’s how to prepare for the worst right now.

 

Build Cash Reserves

 

First of all, you should focus on building some cash reserves. If you can do this, you will have some money to rely on when things do get difficult for you. Having that cash to fall back on can make your life so much easier. Of course, building cash reserves is not easy. You have to have enough excess cash coming into the household to make this possible. You might have to cut back on other things to make this possible, but it might be worth it. The savings should be placed in bank accounts with the best possible interest rates you can find. It might not seem like a good way to use your money now. But it won’t seem that way if you need some money when times get tough.

 

 

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Understand Your Borrowing Options

 

There are always ways of borrowing money that can help you out when you need to endure the bad times. If your own financial problems are small and short-term, borrowing money can tide you over until things improve. But you should also be very careful when it comes to borrowing money because it can make things worse. If you’re not careful, getting into debt can turn into a spiral of debt that seems impossible to escape from. You should understand what all of your borrowing options are while the times are good. You will need to be aware of what each of the options will mean for you when you borrow.

 

Learn Everything About Cash Flow

 

Cash flow problems can easily become much larger issues for you if you’re not careful. If you are someone who earns more at a certain time of the year, you need to know how to plan your income. You should be careful to ensure that there aren’t times of the year when your income falls and you household finances become insecure. This is something that many freelance or self-employed people can face. Managing financial setbacks such as poor cash flow can be a challenge. It’s always better to prevent this kind of thing from becoming a problem in the first place. So, do what you can to manage your household’s cash flow. It won’t be easy if your financial situation is complex, but it can be done.

 

Know the Value of Your Possessions

 

Selling your possessions is not something you want to have to do. But selling a few things can tide you over when times get really tough. You should know what you own and keep a detailed inventory of those things. It’s something that you can start to do right now. You certainly won’t regret it if it turns out that you ever have to sell any of your things. A solid inventory with each item valued will let you know what you can sell to make some money if you ever have to. If selling some possessions allows you to secure a more stable future for your family, then surely it’s something worth doing.

 

Live Within Your Means

 

You don’t need to wait until times get tough before starting to live within your means. It’s so easy to get into a financial mess by leading a lifestyle that is unsustainable. And it might be easy to ignore how bad things are for you and your finances right now. But the thing about money and debt is that it always catches up with you, no matter how fast you run from it. So, start to think about how you can balance the books. You should never be spending more than you earn in any given month. If that’s something that you are currently doing then you won’t be prepared for any bad economic developments to come.

 

 

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Make Paying Debts Your Number 1 Priority

 

Paying off debt is something that should always be done when your household finances are good. It’s a simple case of mending the roof while the sun is shining. If you fail to do this, your finances could be severely worse if you are still trying to pay off debts later on. So, make paying off any debts you have your number one priority right now. Your life is so much easier during the tough economic times when you are free from any kinds of debt obligations. Make those debt repayments the central focus of your monthly budget. It might mean sacrificing other things until you are free of debt, but it will be worth it in the long-term.

 

Think About Alternative Income Streams

 

Are there any alternative ways in which you could make money if you really had to? One of the things that happens when the economy experiences turbulence is that some industries become insecure. They can start to become less productive and active in the market. This mean that demand falls, and then supply has to fall with it. That’s how redundancies come about in the labour market. If there is no demand for your job, then there will be no demand for you either. So, you should think about what other skills you have and what other jobs you could do if you lost your job. Of course, you’ll hope that it never comes to that, but it’s always best to be prepared.

 

Cut Your Car Costs Now

 

Rather than throwing money away on things that are not that important, why not cut your car costs now? Of course, getting around is important. But do you really need to spend money running a car that’s inefficient? These days, there are lots of great electric and hybrid cars that come with very low running costs. That means you can save a lot of money on driving. Yes, you might need to spend some money to buy the car in the short-term. But the long-term money saving benefits of driving an efficient car are huge. Right now, this is something that everyone should be thinking about carefully. If you are thinking of buying a new car, make sure it’s an efficient one.

 

Consider Investing While You Have the Money To

 

Investing your money can be a very wise way to secure your future. Right now, with interest rates at historic lows across the world, it’s not a good time to be a saver. So, instead of leaving your money to fester in the bank, why not do something with it? By investing in something, your money can grow and provide you with a safety net in the future. I’m not suggesting that you invest all your money though. As I discussed above, having those cash reserves in place is vitally important. And investing is always a risky game. Yes, your finances will grow if you take the right steps. But you could also suffer losses too. So, you will need to tread carefully when it comes to investing your cash.

 

 

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Calculate the Minimum Amount of Money You Can Survive On

 

Finally, think about how much money you would really need in order to survive. Everyone should be aware of what his figure is. And it is probably a lot lower than you would imagine. Most of us spent huge chunks of our income on things that are luxuries and that we don’t really need. Of course, that’s not the case for everybody, but it is for many people. Think about how you would have to cut back in the event of a job loss or changing economic conditions. By being prepared for these situations, you will be able to make the most of a very bad situation should something like that happen. Things won’t be easy, but you might be able to get through them until things improve.

 

Now that you know and understand the measures that need to be put in place, start taking action.

Jerry Mooney is co-founder and managing editor of Zenruption and the author of History Yoghurt and the Moon. He studied at the University of Munich and Lewis and Clark College where he received his BA in International Affairs and West European Studies. He has recently taught Language and Communications at a small, private college and owned various businesses, including an investment company. Jerry is committed to zenrupting the forces that block social, political and economic justice. He can also be found on Twitter @JerryMooney   

Jerry Mooney is co-founder and managing editor of Zenruption and the author of History Yoghurt and the Moon. He studied at the University of Munich and Lewis and Clark College where he received his BA in International Affairs and West European Studies. He has recently taught Language and Communications at a small, private college and owned various businesses, including an investment company. Jerry is committed to zenrupting the forces that block social, political and economic justice. He can also be found on Twitter @JerryMooney