Tips for Managing Your Debt in Case of a Recession
It is important to consider any financial goal, including eliminating debt, in the context of your overall financial well-being. What are your priorities? What is your financial picture now and in the future?
With a recession comes more uncertainty. What you choose to do will depend on your circumstances. Generally, the foundation for financial health is to get your financial house in order. This is not usually a linear process. It involves:
- resolving any pressing financial issues
- making sure you can cover your essentials (e.g., housing, food, utilities) without going into debt
- having enough of an emergency fund to cover your living expenses should an emergency arise
Debt is and can feel like a huge burden. When you are in debt, your money is tied up and the debt is costing you interest and probably some stress. Normally, it makes a lot of sense to eliminate your debt as soon as possible. However, during (or pending) a recession, you may want to allocate your resources differently. Now is a good time to focus on stability with your cash flow and security with savings.
Of course, it is prudent to pay your bills in full and on time if you have the means to do so. Stay on track with your debt as best you can. But, now might not be the best time to concentrate on reducing debt due to further financial impacts of COVID-19. Stay in control of your finances during these uncertain times by holding steady with your debt, managing your cash flow, and buffering your savings.