The novel coronavirus has impacted the world in several ways. With the way things are, it is quite obvious that a global recession is inevitable. In the month of June, the United States economy was hit by it. It is a bad period for debtors, which is why I decided to put together some strategies that can help you get out of debt during this economic downtime.
Below are a Few Effective Strategies that Can Help You Repay Your Debt during the Recession:
- Increase Your Emergency Savings
- Look For Ways to Cut Back Your Expenses
- Make a Budget
- Live Within Your Means
- Contact a Credit Counsellor
- Try Debt Consolidation
- Look For Ways to Augment Your Income
- Settle Credit Card Debt First
Recession has a huge effect on the economy. Several people lose their jobs, there is a huge hike in personal debt; generally, things become harder than they were. As someone with one or two debts to pay, how do you cater for yourself/family and still repay your debt?
How to Get Out of Debt During Recession?
Journey with me as I highlight the above mentioned strategies, which are pathways to financial freedom even during these hard times.
Increase Your Emergency Savings:
Recession overwhelms the economy in a way that makes people lose their jobs. During this time, you are very likely to lose your job or take a huge compulsory pay cut.
The loss of your job can make it very hard to settle your bills and repay your debt at the same time.
Increasing your emergency fund, that is, the cash kept aside specifically for special events such as downturns, can make it possible for you to afford your expenses and pay your debt slowly.
Even while paying your debt, it is important that you prioritize saving so you don’t enter into more debt when you run out of cash.
Look For Ways to Cut Back Your Expenses:
You will be shooting yourself in your foot if you fail to cut back some unnecessary expenses. Review your expenses and slash or totally discard those unnecessary expenses so that you have adequate cash to take care of your needs and your debt as well.
Failure to manage your money during this period could drag you deeper into debt. You really don’t want that to happen!
Make a Budget:
The best way to monitor your expenses is to create a budget. A budget helps you determine how your money is being spent, it also helps you manage your money so that you only spend on things that are necessary.
With a budget, you can make plans on how to manage your debt. Most importantly, a budget provides you with 100% control over your money. Create a budget today and start planning towards repaying your debt irrespective of the situation of the economy.
Live Within Your Means:
Experts’ advice that you spend nothing more than 30% of your total income (earning after taxes) on discretionary items. You can create a budget to ensure that you are living within your means and not overspending.
You need to pay your rent, car insurance; you have to eat to stay alive. Your groceries, utilities, etc., are all going to be your significant expense.
Going on vacations, dining out, cable, or anything that is regarded as a luxury or a lifestyle expense is discretionary spending.
Contact a Credit Counsellor:
Because it is a difficult time for everyone (including debtors) contacting a credible credit counsellor to council you on how to manage your expense and repay what you owe is a very good idea.
With the assistance and guidance, you should be able to have a lucid picture of your finances, income, expenses, and assets. These professionals will also fill you in on tips that can help you enhance your credit and start paying off your debt even during the deflation period.
Try Debt Consolidation:
Debt consolidation is an effective repayment tactic. This tactic involves you taking a new loan to repay your debt. Several debts are merged into a single debt with a more favourable interest rate and monthly payment.
With this new loan, you can repay unsecured debts such as student loan debt, credit card debt, etc. You can acquire this loan via credit union, bank, or a credit card company. During recession, loans aren’t usually easy to get but if you have a good relationship and payment history with your institution, you are good to go.
Look For Ways to Augment Your Income:
With adequate cash from diverse stream of income, you can repay your debt irrespective of how troubled the economy looks. One way to augment your income is by taking up a side hustle like babysitting, landscaping, freelancing, etc.
The cash earned from your side hustle coupled with your monthly income should be enough to take care of you expenses and handle your debts.
I am fully aware that working multiple jobs can be very stressful, but this is one sacrifice you have to make if you are willing to repay your debt during these hard times. Financial freedom awaits you, the only question is, are you willing to make the necessary sacrifices to get there?
Settle Credit Card Debt First:
Begin by paying off that high interest rate credit card debt first. The goal is to maintain zero balances each month. So, all that you charge per month is settled within that billing cycle. This helps reduce interest rates and safeguards your finances from risk.
One thing you don’t want is excess credit card debt floating around. It compresses your budget because you have more obligations to take care of. If the worse occurs, and you get sacked, credit cards are always the first debts to tackle. You can tackle it by adopting relief options like credit card balance transfer, unsecured personal loan, etc.
What is Recession?
Several people are familiar with the word “recession” but only few know what it really means.
It simply means a period where there is a significant decline in the general economic activity in a particular region.
It is usually trigged by several factors. The current economical downfall is being experienced in many parts of the world is simply because of the coronavirus pandemic, which has crippled the global economy. During these hard times, there is always an increase in unemployment, reduction in consumer spending, and a reduction in economic activity such as manufacturing or the production of goods.
It puts several people (especially debtors) in a bad financial position, which is why you need to up your game if you are eager to repay your debt at a period when the economy is crumbling. It can last for months or sometimes even years.
Why Should You Prepare for Recession?
Irrespective of what may cause it to rain, we are fully aware that it can happen at any time. Making sure you are well prepared is a very smart move.
By adopting the necessary steps now and putting the best debt repayment plan in place when the hard time bites, you will rest well knowing that you have done the needful.
This kind of preparation requires discipline and budgeting, but these are quite important for anyone who wish to repay his or her debt, irrespective of the state of the economy.
How Does Recession Affect Your Debts?
It cripples the economy in diverse ways. People lose their jobs, stock market drops, sales reduce etc. Taking on a new debt during a recession free period comes with less headache, but having debts to pay when the economy takes a nosedive can make you lose weight rapidly due to overthinking and anxiety.
During these times, you may possibly take a compulsory pay cut or worse, lose your job. You need money to settle your debts. Without a job, or with a reduced income, how do you settle your debts?
This may plunge you deeper into debt because the bills will continue coming in and without enough money to take care of them you will have to borrow once more.
Conclusion:
Debt is not a death sentence. If you adopt the right tactic and you have the right mind-set, you will settle it in no time.
People make several mistakes when trying to get out of debt and this affects their finances in a huge way. If you are struggling with debt, you can seek professional assistance. Find the best one for yourself and enroll, it’s all that is required!
