In February 2020, the United States economy officially entered a recession (when a country experiences an economic downturn for at least 6 consecutive months). Because of COVID-19 and the recession, over 30 million jobs have been lost. This is important to note because one of the markers of a recession is a sharp increase in unemployment.
Just to illustrate the seriousness of the current job loss numbers: During the Great Recession (2008-2010), 8.8 million people lost their jobs.
And it was T-O-U-G-H! I was one of those people who were unexpectedly "let go" by my employer during that Recession. Since 2010, I've learned some key lessons from that time–– I learned how to not only survive... but to thrive through the recession.
Let's get into a few:
1. Forgive Yourself:
You may be beating yourself up for not being prepared for this economic downturn. Maybe you’re replaying every time you ate out last year and how much you could have saved. Stop. It’s not your job to predict pandemics. And being hard on yourself is not helpful. Forgive yourself and identify the lessons: 1. Recessions are a natural part of the economy and happen every 10-15 years. 2. Commit to being prepared for the next recession by taking action today.
2. Budget Differently:
During the Great Recession I spent a lot of money trying to keep up with expenses after I lost my job. I wish someone would have told me that when you don’t have any income coming in or your income is reduced, the most important thing you can do to preserve the money you do have by switching to one of two budgets.
a. Health & Safety Budget: If you have no income coming in, that means any expense that does not provide for your health and safety will have to wait. Yup, even if that means being late. Your health and safety comes first.
b. Noodle Budget: If your income has been reduced or is in danger of being reduced…use your, “if you had to eat ramen noodle budget”. A noodle budget is your bare-bones budget that only includes necessities and basic bills. That means no eating out, streaming services or subscriptions. It identifies the lowest amount of money you need monthly to survive without paying bills late (a.k.a your financial baseline). Do you need to drop down and get your noodle on?
3. Ask for help:
Asking for help is a sign of strength. It means you acknowledge that you’re unable to do it alone and need assistance. How smart is that? Start by calling the companies you owe and share your hardship. Many will offer some assistance. Even if they don’t, remember your Health & Safety Budget. YOU have to choose YOU first and foremost. Don’t forget to reach out to your municipality, you may be able to get help with housing, food and utilities. Lastly, your family and friends may also be a resource. I moved in with my sister for almost a year during the Great Recession as I struggled to get on my feet.
4. Save! Save! Save!
If you’re fortunate enough to still have an income, it’s important to pad your emergency savings account until you have at least 6 months’ worth of your Noodle Budget saved. No one knows how long a recession will last or if their job will survive. Having a strong savings account is your first line of defense. If you don’t have 6 months saved, I suggest that you temporarily pay the minimum to your debt and put the excess toward savings until you’ve fully funded your emergency account.
5. Purpose, Passion, Pivot:
Recessions can be a time of rebirth. Many millionaires are made during a recession because folks that have lost everything feel like they have nothing else to lose, so they finally chase their dream. Have you suffered a great loss? That means you have an opportunity to rebuild the life that you truly want. I started the recession as a school teacher and ended it as an entrepreneur and I haven’t looked back since. How will you pivot toward purpose and passion?
Andddddd... guess what?! Little ole' me shared these tips and more on Good Morning America (YES! That one!). Check out the full video here:
Okay, so now we have a few tools in our kit to help us stay afloat or thrive during the recession.
Stay tuned for more insight and personal finance tips.