How to Protect Your Finances in an Economic Crisis

At this point, obviously nothing is certain. But a degree of vigilance in the event of a downturn could help to soften the blow should the worst come to worst. While we would never offer you financial advice, below you’ll find a selection of suggestions that could offer a little more financial stability in an economic crisis.

Disclaimer: This content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.

How do I help protect my money from a market crash?

Consider diversifying your portfolio

By keeping all your eggs in one basket, a recession is bound to hit you hard. But with a diverse portfolio, it’s possible to spread your money across several different assets and decrease risk in the process.

If you’re interested in diversifying your portfolio, then a solid rule of thumb is to invest in assets that aren’t strongly related. So, when one rises, the other takes a dip (and vice versa). Complementary investments that move in opposite directions keep you covered, ensuring you’re never exposed to too much risk at any one time.

Alongside the usual assets like stocks, bonds, and shares, there are a host of alternative investments you may want to consider strengthening your portfolio with, including gold, commodities like sustainable energy, real estate, hedge funds, collectibles and antiques, and private equity.

Stay on top of your debts

During tough financial situations, debts can soon pile up, making paying off what you’ve already accrued tougher and tougher. You don’t need to do anything drastic. Realistically, you won’t be able to pay off 30 years’ worth of mortgage repayments in 10, for instance.

However, every little bit of debt you can pay off helps. Financial advisors generally recommend that anything with an interest rate in the double digits or with a variable rate is worth focusing on first. It’s a more long-winded process than paying off small debts first, but it does mean paying the least amount of money in interest overall.

Starting early on paying off your debts means you won’t have to dip into your savings or emergency fund (more on this later) if you’re struck by a change in your finances.

Live within your means

Resisting the urge to splash out, especially when you can afford to, can be difficult. But living within your means keeps debt from knocking at your door should things like gas or food prices go up.

If you’re married or live in a two-income family, then you might want to consider seeing how close you can get to living off your partner’s income. This can truly pay off during upticks, giving you the chance to save enormous amounts of money.

With the money you save here, you could well have enough to seriously speed up your mortgage repayments. Who knows? You may even have enough to achieve that most enticing of prospects: an early retirement.

This approach has the added benefit of providing a safety cushion should one partner lose their job. You already know what it’s like living on one income, so while adding to your savings will take a break, you’ll still be able to live comfortably day-to-day.

Build an emergency fund

Something you can lean on should you be hit with unexpected expenses, such as a car repair or a medical issue can be a huge help in the aftermath of an economic crisis. Consider putting 10% of every paycheck into a high-yield savings account to get your emergency fund going ahead of potential economic crises.

Financial advisors state that your emergency fund should cover three to six months’ worth of living expenses, but in a recession, you’ll probably want something closer to a year. If you were to lose your job, you might be out of work longer than you think. The more you have in your emergency fund, the more of a net you’ll have should you land on hard times.

Identify where you can cut back

Things like rent or mortgage payments, car insurance, groceries, and utilities are obviously non-negotiable. But you can easily increase your savings by making a few simple changes.

Go through your monthly expenses and separate the essentials from the things you can live without. It might mean living with less luxury during the good times, but should the economy be on a downswing, you’ll have a lot more in the reserves than you may not have had if you’d carried on treating yourself.

Experts generally say that you should be spending no more than 30% of your net income on discretionary items, i.e., things like dining out, taking vacations, pricey internet and cable packages, and other similar items. If this sounds familiar, then you may want to think about eliminating them sometime soon.

Strengthen your resume

It goes without saying that you’ll be relying on your income to stay afloat even at the best of times. But during economic strife, you could find yourself jobless all of a sudden. Here’s where maintaining a strong resume can be a huge boon.

When you’re good to go with a properly updated resume, your chances of bouncing back or moving into a new industry remain a lot stronger than if you hadn’t. If you need to brush up on certain soft or hard skills that are in demand, then try scoping out free courses and certifications.

And don’t forget to check what the market rate of your current role is. When the market is hot, you’ll want to make sure you’re getting paid the amount you’re worth. Whether you go for a job elsewhere or negotiate a raise, the extra cash here can make all the difference if it’s going into your savings.

At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk-free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

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