Our capitalistic economy naturally cycles through booms and busts. One of the biggest lessons that arose from the pandemic is that sometimes you need to prepare for economic hard times. There are no job guarantees, the government is slow to act, and you can't rely on social services to get you through those times of financial uncertainty. Instead of leaving it up to chance, you can prepare for economic hard times by building an emergency fund and by saving money to float your living expenses while you look for work.
Start by creating an emergency fund
If you've ever run into car trouble, broken a tooth, or had a major appliance break down outside of its warranty period, then you know how hard these sudden expenses can hit you financially. The exact optimal amount to set aside for emergencies will vary depending on the area you live in and the size of your family. Once you have squirreled away $1,000 to $3,000, you'll be able to weather most of those one-time emergency expenses without going into debt. Put this money where you can access the full amount quickly, without paying any penalties or fees for doing so. A savings account at a bank or credit union might be the best place to hold your emergency fund, even if it doesn't earn much interest. For an emergency fund, the ability to pull the money out trumps the interest it could earn.
Then build up your savings
Jobs are rarely secure in today's world since most workers are employed at will. You never know when you could be laid off or furloughed, and it can take time to get hired again. Stashing money away to cover your living expenses can get you through those economic hard times until you become gainfully employed again. Just as with the emergency fund, the exact number of months you should be able to cover will vary depending on your industry's outlook, your job skills, your family size, and other variables. A good rule of thumb is to save between three and six months of your monthly living expenses. Consider stashing this money in a high-interest, low-fee money market account for the possibility of earning a decent return as you're unlikely to need the funds immediately. Just be sure to shop around before choosing one. If finding the extra money you'd need to save seems impossible, then look towards making budget cuts and adding additional sources of income to help shore up your savings.
Check your budget and make adjustments
What you can start right away is to make a budget and stick to it. Look through your bank receipts and credit card statements to get a clear picture of your incomings and outgoings. Use this information to create a workable budget. It's okay to treat yourself and others now and then, but make sure you account for those small treats in your budget. Tell your money where to go, or at the end of the month, you'll wonder where it all went.
Minimize your monthly expenses
Do you have a gym membership you don't use? Are you subscribed to a streaming service you rarely watch? Look at your recurring fees and cancel everything that does not add value to your life. The price tags do not matter! Some $5 here and $10 there eventually add up over time, and that's money you could put towards meeting your goal of being prepared for economic hard times. Check if you can replace an item on your expenses list with a free service or something less expensive.
Maximize your monthly earnings
Multiple streams of income are vital for two reasons. First, it's a great way to build up your savings. Second, you never know when your company might decide to downsize or cut your pay, so having backups will help you stay afloat economically. Maybe you could even turn your side-gig into your primary source of income if needed.
If you need more flexibility, then freelancing will probably fit your style. You can strike out on your own by advertising the skills you offer on sites like Craigslist. You can also check with your local Facebook group to see if anyone needs your services. If you don't want to handle admin work by yourself (such as looking for clients or handling payments), you can always join a freelance job platform like Upwork and Fiverr. They take care of many things for the freelancer, but they also keep part of the earnings, so there's a trade-off.
Develop new skills
Learning in-demand skills will boost your visibility in the job market. One of the best ways to beef up your resume and attract potential employers is to develop some new desirable skills. It might seem daunting to take on further education, but in-demand skills can help you earn additional income or score a better job.
- Are you interested in coding? Check some free online courses at Codeacademy and edX. Computer programming is one of the most sought-after skills today, and the demand for coding talent is likely to increase in the future. It's a tough skill to learn, but putting in the work now will benefit you for years to come.
- Challenge yourself to learn a second language via apps like Duolingo and Khan Academy. Languages take time to master, but they can be highly lucrative in the right field. Pick one that is high in demand in your industry and your area. If you're already proficient in a second language, expanding your skills in that language may be a better option than starting fresh.
- Learn website design skills through free online sessions at Udemy and Coursera. Web design is relatively uncommon, which means less competition for jobs and freelance work. The demand is also likely to remain for quite some time. The best thing about web design is that you don't necessarily need to know how to code, thanks in large part to the many plug-and-play platforms that make it all easy (see WordPress, Wix, and Squarespace).
- What do you think about becoming a licensed Certified Nursing Assistant? Admittedly, learning these skills won't likely lead to a good-paying job. However, the medical industry will continue to grow as our population continues to age, so it's one of those rare jobs with reasonable job security. The certification is also one of the quickest; you can be licensed and ready to work in about six weeks. You can find free CNA training and licensing opportunities through your local nursing home, Red Cross organization, hospital, and other places that focus on caring for medical patients or the elderly. Some will even pay you while you're training, so long as you agree to work for them for a certain number of hours. Since most establishments that use CNAs staff them around the clock, it's good for moonlighting opportunities.
If financial activities bore you, make saving and earning a fun game to keep your motivation up. Try rallying your family to complete a no-spend monthly challenge or beat your earnings from one month to the next. Just remember that the extra money is earmarked for your emergency fund and money market account. Taking steps to meet the financial goals you have set up will prepare you to face any form of economic hard times that comes your way!