How to prepare for changes in the economy.
The economy has been doing some interesting things lately.
We’ve seen a series of rate hikes in an attempt to cool inflation. Canadians are spending less in a number of categories including housing, and, concerningly, some putting off saving.
This economic activity has led many to wonder if a recession, defined as a sustained decline in economic activity for at least six months, is on the horizon.
Although the unemployment rate remained at a record low in July, a promising sign in these strange economic times, the answer isn’t clear.
Fund that emergency fund.
Whatever happens, building an emergency fund can serve as a buffer against potential changes in your financial situation due to the economy. The first step is reviewing your spending habits, building a budget (if you haven’t already), and starting to think about ways to cut back on your expenses (if you can).
Here are some ideas to help step up your savings so you can help get yourself recession-ready.
Clean out your fridge.
If you’re already tracking grocery deals in your coupon app and price-matching at checkout, you’re off to a great start! But if you find yourself regularly tossing your non-perishables while your grocery bill expands, you can reduce food waste by avoiding purchasing groceries until you’ve used up all of your food.
Tip: As soon as you get home, wash your produce and prepare pre-made freezer meals for later. You can also place veggies nearing their expiration in one-pot meals like soups or roasts to help reduce your waste.
Try a no-spend challenge.
It’s hard not to be tempted by the #GRWM (get ready with me) posts on social media where well-meaning influencers regularly share affordable finds. But this can drive our desire to shop for things we don’t need. The challenge: Commit to buying only essential items for a two-week period, and wear what you have.
Tip: During the challenge, consider taking a social media break or limiting your time on social channels to help stay the course and avoid the temptation.
Buy used.
If you do need to shop, second-hand goods can be both budget-friendly and fun to find. You may prefer browsing local thrift shops in search of aughts-era “vintage” pieces (we can’t believe we just put the 2000s and vintage in the same sentence). Or, you may enjoy the community aspect of shopping in local buy-and-sell groups.
Tip: For special occasion pieces that you’ll likely only wear once, consider borrowing from (or trading with) that fashionable family member or friend!
Keep your credit card balance low.
A credit card gives you purchasing power while allowing you the ability to help build your credit. But, it’s important to be mindful of every dollar during an economic downturn, and that includes interest charges. While building your credit, try to make more than the minimum payment each month (if you can) to keep your balance and any associated interest charges under control.
Tip: If you have a Capital One credit card, you can turn on purchase and payment notifications through our mobile app.
Making room in your budget to set a little cash aside may help you feel more at ease about the future – recession or no recession. Small changes in your spending habits, coupled with small contributions to your emergency fund today, can better prepare you for tomorrow. We believe that.