Continuous changes in the financial world and the slowdown in different industrial sectors, many people are worried and uncertain about their financial situation in the future and are afraid of not knowing how to react to a recession. But leading economic experts have offered precious advice on keeping themselves prepared and handle the difficult times ahead.

It is very critical to have financial support and be aware of the fact that recession could last between 6 to 12 months. And at the same time economic downturn could be a good opportunity to better organize personal income and expenses.

Tips to Survive Financial Crisis During Recession

(1) Save for an emergency

Once you think your financials are stable, it is necessary to create a savings fund to be able to cover expenses for three to six months in case you are out of work and/or without income for a while.

This savings fund should be designed for 6 to 12 months of expenses, since only 3 months would not be enough.

(2) Reduce high interest rate loans

In case of acquiring a debt with a bank, try to choose an option with low interest rates. If you have already acquired a credit card with a high interest charge and you have a good credit history, try to negotiate with the entity to reduce this amount.

If your bank cannot lower the charge, try to migrate your loan to another financial institution that offers the option of paying it with lower interest rates. This way, you will be able to free up capital in case you need it for a financial emergency.

If you have acquired a mortgage and after it was granted the interest rates went down, renegotiate with your bank so that you can cancel your loan and get a one with a lower interest rate. Normally, this change involves a penalty, but you may be better off paying it, so you should evaluate which option is best for you.

Try to avoid loans with high interest rates

(3) Have a good credit history

When you have a stable income, it is essential to be disciplined with your credit cards and other banking transactions so that you can build a good credit history.

This means that, when you have the means, make your payments on time and try not to borrow too much. In an emergency, you may need a loan and your credit history will determine whether the bank approves it or not.

(4) Do not panic and do not pay your debts in cash

A very common mistake is that, when entering a recession, people tend to pay all their credits in order to get out of those expenses and free up capital.

The ideal is to keep the debt with small and consistent payments, especially if your interest rates are low. This way, the money you have left over will help you meet your expenses in case you have lost your source of income.

(5) Buy non-perishable items

Whenever you can, make a large purchase of non-perishable goods that you can keep in case of an emergency and/or economic downturn, such as canned goods, toiletries, toilet paper, household essentials, among others. This is a good way to save and free up capital in case of a crisis.

Also, try to freeze as many foods as possible, such as fruits and vegetables. Many supermarkets sell these products directly frozen and they are usually cheaper.

Additionally, opt for generic brands of detergents, toilet paper, light bulbs, napkins, canned goods and other items whose quality is not much different from a recognized brand and can significantly reduce its value.

(6) Be aware of the cost of gasoline

If you are going to use your vehicle, try to do all your errands in one outing, choosing points close to each other so that the routes are shorter and you spend less fuel.

Also evaluate other options such as public transportation, if possible, or paying for delivery if it is more economical than using your car.

(7) Invest and generate extra income

When your personal finances are stable, analyze which companies could have solid financial growth and buy their shares. To do this, evaluate what kind of services or products it offers, what sector it belongs to and the prestige it has.

All of these factors will help you identify whether the business could withstand an economic downturn and whether it will provide good long-term income. During downturn sectors such as consumer goods, utilities and health care have performed well during the last 5 recession.

On the other hand, it is very good to have an additional job in your free time, either in a company that gives you the possibility of having a flexible schedule and you could even start selling items online and generate your own business gradually.

Hi, I am Nikesh Mehta, owner and writer of this site. I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at nikeshmehta@allonmoney.com.