Economists continue to state that a recession is coming for 2023. The thing is, it’s now looking like it’s going to be summer rather than a spring recession. That means we still have time to prepare for an economic downturn.
But what does that preparation for a recession even mean? Let’s look at three ways you can prepare your finances for a rough summer.
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Pay off debt
First and foremost, before you’re putting savings aside or making investments or any of that, you need to pay off your debt. Your debt is costing you money for every single month you hold it. Interest rates, fees and other costs all add up, with even thousands of dollars simply being wasted in order to hold debt that could be paid off sooner.
So, go through your budget, reduce your costs, and put as much money aside to pay off debt as soon as possible. Make a list of all your debts from highest interest rate to lowest, and work on the first debt while paying the minimum of the rest. Should you have just credit card debt, you could be debt free by summer!
Work on that budget
As mentioned, a budget will certainly also help. But while you may have a budget in your household, I’d say it could use a serious overhaul for a number of reasons. Rising interest rates, inflation, and a recession on the way means you need to prepare your budget and then some.
So, look again at what you can cut. This could mean serious cuts, such as selling your car for a cheaper version. It could mean choosing less-expensive food items or eating out less. Or it could be simply walking to work to save on gas. Whatever you choose, put those costs towards your savings.
Save and invest
Yes, the final step is now creating savings to help you through the rough summer. This can be done by putting that cash you’ve saved aside. It can also be done by even selling items you don’t need around your home or renting things out.
Use that cash to put into a savings account where you can go on to invest it. I would suggest a company like NorthWest Healthcare Properties REIT (TSX:NWH.UN) as a solid option, as the company is in the healthcare sector. This is a sector that doesn’t disappear during a downturn. Further, shares are quite valuable with the company continuing to post strong earnings. This includes an average lease agreement of 14 years and a 97% occupancy rate.
You can therefore use your cash to invest in the company’s dividend yield at 9.82% as of writing. That could certainly bring in a lot of cash and a lot of savings. But don’t spend it! Use it to create an emergency fund that will get you through this recession and any future ones to come.
Bottom line
A recession can be a scary thing. But taking these steps can help you not just prepare for this one, but help you create enough savings to prepare for any other financial strains that come your way.
