With economic uncertainty on the horizon, personal finance experts provide tips to save money and make smart financial decisions today. Consumer confidence has dropped to the lowest levels in five years. With alarm bells from economists about the rising risk of recession, many are turning to find guidance on how to navigate this new and choppy terrain. Metro Monitor Matt Watson Financial Wellness Matt underscores the need to understand where you are starting from and continue to be aware of how you’re spending money. At the same time, Courtney Alev promotes frequent budget recalibrations and a controls-driven approach to help build confidence even in tough times.
Understanding Your Financial Starting Point
Especially during periods of economic uncertainty, as Matt Watson recently wrote, it’s essential for people to know where they are financially today. His number one recommendation is that everyone should assess their status in each of these areas. While this assessment is a valuable resource, it must be recognized as a starting point toward financial unknowns.
“Take stock of where you are across a number of different categories.” – Matt Watson
Watson’s insights couldn’t be more timely, as today’s post financial crisis capital markets are still in turmoil. With consumer confidence at an all time low, people are being left in the dark about their financial futures. On top of that, the uncertainty increases as no one can foresee how the economy will develop. Not even the professionals who do this stuff for a living know the answers.
“No one has a crystal ball. No one, even the people that do this professionally and have done it very successfully for many years, know what’s going to happen.” – Matt Watson
Budgeting for Stability
Yet budgeting is a key practice for keeping financial stability during unpredictable times. Courtney Alev suggests individuals review their budget or debit card expenses to gain a clearer understanding of monthly spending patterns. In so doing, they can pinpoint areas where they could save money and repurpose their budgets to focus on those priorities.
As Alev likes to say, a budget only matters if it helps you make better decisions. So, she advises people to be willing and ready to adjust their budgets from month to month.
“A budget is only as good as it is to help you actually make decisions, so don’t be afraid to update and adapt your budget as the months go by.” – Courtney Alev
Alev advises dividing expenses into three categories: needs, wants, and wishes. This kind of classification knowledge can help people prioritize critical spending while spotting surpluses fast that can be scaled back or cut out entirely.
Additionally, experts suggest frequent budgeting assessments to catch any spending overruns or shifts in community needs. Watson cautions that people need to start making financial changes before they react in a fire drill manner.
“Your choice is really to cut now or cut later, so it’s easier to cut now and have a cushion.” – Matt Watson
Managing Debt and Building an Emergency Fund
Debt management is crucial during economic uncertainty. Jim Weil categorizes debt into three buckets: short-term, medium-term, and long-term. Knowing the types of debt one has will allow borrowers to make better repayment plans.
For people in the cycle of credit card debt, Alev advises cutting down credit usage or even getting rid of credit cards completely. This method not only encourages greater accountability for existing debt, it builds a long-term feeling of confidence towards debt.
Despite the buzz, experts advise controlling rather than accumulating debt. They recommend establishing an emergency fund that ideally has three to six months’ worth of expenses. Weil underscores the value of a healthy emergency fund as preparation for bigger financial moves. Just as important, it can provide additional protection during difficult periods.
“Identify any changes that you might need to make to have more of a safety net in place that could give you confidence.” – Courtney Alev
Watson recommends that people start reducing their spending today instead of waiting until the burden of financial pain is too much to bear. He’s convinced that by doing the right things early, people will be much better off financially when disaster strikes.
Protecting Mental Health During Financial Strain
Even in an ongoing difficult financial climate, the protection of mental health continues to be a top priority. Alev emphasizes the need to prevent money worries from taking over your mind. She thinks it’s good to be aware of what’s happening in the economy, but warns against letting yourself be driven mad by it.
“It’s good practice to stay informed but you don’t want to let the news cycle consume you.” – Courtney Alev
Alev further encourages people to recognize that, although the unknown is scary, panicking should be avoided at all costs. Instead, they should focus on manageable steps that can help them regain a sense of control over their financial situation.
“You really want to try not to panic. It can be unnerving but most likely, you should have time to make that up.” – Courtney Alev
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