8 Tips for Financial Planning During an Economic Downturn

It’s difficult to create a solid financial plan when the economy is booming. Add an economic downturn and creating a financial plan can seem impossible. Here are eight tips for financial planning during a downturn that can help you stay the course.

1. Be Sure You’re Thinking Clearly

It’s easy to give in to panic during a downturn. In order to make good decisions though, you need to think clearly. Give yourself a cooling off period before you make decisions to be sure you’re making them with a level head. Wait a day or talk your worries over with someone. Just be sure when you make a decision you are coming from a place of logic and information, not a place of emotion.

2. Get Everyone on the Same Page

Take some time to get your family on the same page about your finances. What are your short-term goals and priorities? What are you working towards in the long-term? If everyone knows the end goal, making small changes during a downturn can be less difficult.

3. Create A Bare-Bones Budget

A key step towards successful financial planning, no matter what the economy is doing, is knowing exactly how much you need to get by. A bare-bones budget can help. A bare-bones budget covers all of your needs. Once you know how much your needs cost, you can add back in wants if there is money left over. Having this lower limit will help you see exactly what your expenses are and how you can cover them. Listing out your expenses can also help you find ways to cut back if needed.

4. Re-Evaluate Your Priorities

As the economy changes, sometimes our goals and priorities have to change too. It is okay during a downturn to prioritize meeting your necessary expenses and paying down debt over other financial goals. Shifting money to these two areas can help you have peace of mind knowing your bills are covered. It can also help you save money by paying down debts so they will accrue less interest. Paying your debts can also free up money in the budget for other goals as you pay them off.

5. Take Advantage of Dollar Cost Averaging

Dollar cost averaging is an investing philosophy where you invest the same amount of money into a stock or fund at set intervals (monthly, semi-annually, or annually). It is nearly impossible to actually time the market and buy low and sell high. Staying consistent with dollar cost averaging allows you to buy more shares when the price is low and while you buy less when the price is high. This helps remove some of the variability of the market.

6. Think Long-Term

It can be hard during an economic downturn to plan for the future. When things feel so uncertain, the tendency can be to shut down. This is when it is helpful to remember long-term trends. The economy won’t always be in a downturn and when things turn around, having plans in place to get where you want to go will be helpful. So be sure to keep the big picture in mind!

7. Stay Organized

It is always important to keep your financial life organized. But this is doubly important during an economic downturn. Knowing when money is coming in and when you have to pay bills is crucial to sticking to your budget. Track your income and expenses in a way that makes sense to you. But know where everything is and when it is due! Some tracking methods I’ve seen work well for people are budgeting apps or Excel or Google Sheets. If there are multiple people in your household managing money, I recommend a tracking method you can share to help you stay organized.

8. Never Stop Learning

One big thing you can do during a downturn, or anytime, to help your financial plan stay strong is to always keep learning. The more you know about personal finance and financial planning the better prepared you will be in good times and in bad. To keep the cost low for learning, check out personal finance books from your local library, listen to podcasts, or find blogs to read.

Even though it is hard during a downturn, you can still make a financial plan and work to stick to it. Stay calm and remember that progress comes from small actions repeated over time!


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