How to cut costs and budget better before a possible recession

We don’t need many things. The pandemic has proven that to us.

We live in a nation of excess and waste. For many of us, purging unnecessary things was a fun pastime as we kept our social distance. I’ve sold nearly $500 worth of furniture, toys, clothes, and junk online; I was completely surprised that there was a market for things I no longer needed.

It was the best formation for our next hurdle, a recession.

Whether the economy falls into the gutter or not, we all need to get our homes in order. Not just tidying up, but rather making tough decisions about how we spend our money.

It’s a challenge because many of us want what we want when we want it, even if we don’t have the money for it.

“The problem isn’t income, it’s how much we spend,” said Dr. Rahul Verma, professor of finance at the University of Houston-Downtown. “Most of us spend too much. It’s about controlling our spending.”

With the alarm bells ringing for an impending recession, it’s easy to fill your mind with doom, especially with inflation at its highest level in 40 years. But don’t panic. It’s hard to make good decisions when you’re scared.

“Use fear or worry as motivation for change. Think of running your household as a business,” Verma said. “It forces us all to reassess our finances. Driving a BMW or a Lexus is not important at the moment.”

No one would ever call me a spendthrift. I’m not an excessive shopper and prefer DIY projects. I don’t even use a credit card. But my guilty pleasures are music, movies, interior design and travel.

During the pandemic, I’ve been falling for discount deals on music and movie streaming services and home accessory sales. I also signed up for a regular grocery delivery service, which seemed like a huge convenience at the time.

All of these services were cut from my budget. I also reassessed insurance policies, utility bills, and phone service contracts to find the most savings possible. These were the easy things to do.

The difficulty has been cutting out the things I want – like a good bottle of wine or an expensive manchego cheese, dinner with friends and a dream vacation.

Verma said many people try to streamline discretionary items, such as entertainment and recreation, into non-discretionary items, which are essential, such as a mortgage payment or utility bills.

Note: Vacations are not an essential item at this time. It pains me to write this.

“We have to be honest with ourselves. Changing our habits is the hardest part. We need the courage to embrace utilitarian spending,” he said.

We have all been warned of the need for an emergency fund, say three to six months hidden salary. But who really has that? It may be a lack of discipline or care or both, but it should be a goal.

“Most people don’t live on a budget,” said Cheryl Creuzot, president emeritus of Wealth Development Strategies LLC and author of “Real Lives. Real Money.” “It’s time to tighten your belt, cut your spending. Pay off your debts.”

It’s easy to turn to credit cards to cushion the pain of the recession, Creuzot said, but now is not the time to take on more debt. Start paying off your highest debt, say a credit card with a balance of $20,000, she said. Then, reduce your purchases and look for coupons and discounts.

Creuzot and her husband, who are empty nests, usually had dinner every night, she said. Now they only come out once a week. She also gave up on getting a Peloton exercise bike.

Side hustles, or second jobs, are an option, especially as the job market continues to be strong.

Creuzot’s daughter-in-law, assistant day manager, now teaches infants and toddlers to swim in the evenings and on weekends.

“A lot of people are surprised that they have other talents that people are going to pay them for,” she said.

She also suggested talking with your kids about the discount.

“Sit down with them and your budget and cut those things that aren’t necessary. Now is not the time to take your money and run for the hills. It’s a normal cycle of things,” he said. she declared.

A recession will hit people differently. Low-wage workers are likely to feel the hardest pinch.

“Whenever we have difficulties, the lowest paid are the most affected. But we have to turn lemons into lemonade,” Verma said.

Fortunately, a recession will not last forever.

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