Prepare Your Finances For Success

Prepare Your Finances for Success in 2023

Given the likelihood of a recession in 2023 and the impact rising interest rates have had on your debt and investments, you should review your existing financial strategy.

Prior to choosing your strategy for 2023, you should examine 2022. List your errors, including the things you tried that did not work, the things others tried that did not work, and the things you did that worked. The knowledge you gained may assist with your decisions for the new year.

Celebrating your successes helps you maintain a positive mindset toward money.

You are now prepared to begin making plans for the coming year and to prepare for a recession. The financial moves you should make are as follows:

1. Pay off high interest debt

You should pay off any highinterest debt you may have, whether credit card, personal, or other debt. Credit card payments often accrue interest at rates higher than what you can get on your cash, but if interest rates rise, the cost will increase. Start attacking that balance now, and don’t charge any more if you can possibly avoid it.

2. Add to your emergency fund

Three months of living expenses in savings is the general rule for an emergency fund. However, during a recession, an emergency fund is even more important so it may be advisable to increase that to six months to a year. The amount is what makes you feel comfortable. You need enough money available to maintain your household should something happen to your income.

3. Review your monthly budget

Examine your spending habits, as well as your bank and credit card accounts, to see where you might be able to make some cuts. The money you save can be used to supplement your emergency fund or leave leeway in your budget in case your costs rise or your income falls.

4. Reconsider big purchases

You might want to reconsider buying a big-ticket item like a house, car, or piece of furniture, especially if you have any worries about your job security. If you don’t absolutely need it now or if it’s not an emergency, don’t buy it.

5. Evaluate your job security

You must consider the possibility that you or a family member could lose your job. Create a backup plan and identify how you will make money in the short term in case of job loss or a cut in your pay. Explore ways, such as online jobs or businesses, to earn extra money.

6. Don’t cash in investments

The stock market’s recent volatility could make you feel uneasy and consider selling your investments. When stocks decline, however, the loss is not realized until the asset is sold. According to experts, if you have investments in companies that endure, trust them, and stick with them. Additionally, it presents a chance to get good stocks at a “discount.” Consult your financial advisor to determine the best course of action based on your current and future financial goals.

Preparation is key to successfully navigating a recession.