How-to Prepare for a Recession
The best way to prepare for an imminent recession is to strengthen your financial situation:
Beef up your emergency fund
Payoff any high-interest debt
Develop alternative income streams
What we’re doing:
Save $1,000 for a starter emergency fund per Dave Ramsey’s Baby Step 1. We’ll keep this in an online high yield savings account. We like to use Marcus by Goldman Sachs.
Funnel any free cash flow we have to paying off our credit cards starting with the highest interest rate first using the Debt Avalanche strategy.
Develop alternative income streams by freeing up free cash flow from redundant/inefficient liabilities such as:
Switching our wireless provider to a prepaid phone plan with Mint Mobile. This will reduce our phone costs by 57% and free up $80/month or $960/year.
Selling our second vehicle which is no longer a need. This will eliminate $421/month in payments, $62/month in gas, $426/year in routine maintenance, and $373/year in registration fees. This would provide us with an additional $549/month in free cash flow or $6,595/year that could be used towards paying down credit cards.
