The US economy has been more or less in expansion mode since the Great Recession of 2009, but expansions do not last forever. Although no one can say with certainty when the next recession will strike, it is certain that it will eventually come. And if so, you want to be as well prepared as possible.
With that in mind, here are a few steps that you can take to ensure that your finances are secure.
Know what to prioritize
If you have student loans, but you don’t have a solid savings account, Liz Weston, a personal financial expert, recommends using extra money for your savings instead of paying off low interest debts.
“Don’t rush to pay off student loans or mortgages, especially if you have a higher debt or a meager emergency fund,” she writes. “Your additional principal payments will generally not reduce your required monthly payment, and you cannot get that money back if you need cash in an emergency.”
Your biggest goal should be to fill up your savings. For example, if you have invested heavily in investing, it may be time to scale it back and transfer part of the money to your bank account. Remember that you cannot cash your debits for cash without having to pay fines and taxes. (Although that is another reason to put a Roth above a traditional IRA if you can, because you can withdraw the contributions.)
“You should be able to leave any investment on the stock market alone for at least five years and preferably 10, so your portfolio has time to recover from recessions,” Weston writes.