A woman holds her infant daughter as she looks over budgeting and managing finances during a recession.

How to Stick to a Budget During a Recession


A recession can have a devastating effect on finances. We walk through some adjustments you can make to protect your financial future when times get tough.

In March, 58% of Americans stated that the coronavirus had had a "somewhat negative" or "very negative" impact on their finances, according to the National Financial Educators' Council. And when times are hard, sticking to a budget is a crucial part of your financial survival.

You may have a loss of income or feel uncertain about the future, but you can take concrete steps to put your money health on the right footing. This might mean pulling back on some financial reins until there’s more certainty in your life. When the going gets financially rough, here are some strategies for keeping your head above water:

Go Through Cash Flow With a Fine-Toothed Comb

If you don’t know what’s coming in and going out, it’s impossible to know where you can save some money. Go through the last few months of bank statements and credit card bills to get an idea of where you're spending your cash—you might be surprised by where some of it's going.

Build a Zero-Based Budget

About one in five people don’t have a budget at all, according to Debt.com. (Biggest reasons for not doing it: They feel they don't earn enough income or that it's too time-consuming.) If you’ve been free-wheeling your spending thus far, it’s time to get serious. Make a plan that allocates each dollar to a specific task. If possible, give your recession budget some wiggle room in case you receive a pay cut or other financial hardship. If you’re relying on credit cards to make ends meet, determine what you need to cut to make it possible to stop living on debt. You can manage your budget with an app like Mint.

Cut the Fat

Maybe you’ve lost your job. Maybe you could lose your job. Maybe you’re just facing a great deal of insecurity for the next few months. Go through your expenses, identify the must-haves, and try to eliminate as much of the rest as you can. If it’s discretionary, can you live without it for a little while? That means things like takeout, clothes, and entertainment, among other things. The less you spend now, the more you have on hand if you're furloughed or laid off.

Check Your Recurring Charges

Among users of subscription management service Truebill, about one in four realize they're paying for subscriptions they don't want. And for the 17% of site users who nix a subscription, the average yearly savings is $512. You may be paying for things you’d long forgotten you signed up for, and those charges—even for $9.99 or $12.99 a month—add up fast. Pay attention to the cyclical charges showing up on your credit cards or bank account and make sure you’re still using all of them.

Pause Any Aggressive Debt Paydown

If you were assertively going after some consumer debt—paying off a car loan or your student loans early, say—return to your regular pay-off schedule. You may also find that during really hard times, the government lets you pause payments altogether, so take advantage. Because cash (and jobs) can be tight during a recession, it’s important to keep as much of it on hand as you can.

Keep Saving for Retirement

It may seem like a crazy time to save for the future, but it’s a bad time to fall behind. (And it’s definitely not the time to cash out your retirement accounts.) If you can, keep your retirement contributions going, or at least maintain enough of a contribution to get any company match that may be available. Keep in mind that if the market’s down, that means you’re buying investments at lower prices than usual, which means there’s even more room for future growth.

Have a Backup Plan for Benefits

With millions of people newly out of work, there's a chance you could find yourself scrambling to replace employer-sponsored benefits if you're laid off. You may be able to maintain your workplace benefits for up to 18 months under the Consolidated Omnibus Budget Reconciliation Act (or COBRA), but it can be pricey—you'll have to pay the full premium plus an administrative fee. You may want to investigate what kind of marketplace plans are available at healthcare.gov.

Bulk Up Your Emergency Fund

If you don’t have three to six months of living expenses in an interest-earning savings account, now’s the time to work on that. Put a little of each paycheck away to help build your cushion, which will come in handy if you’re faced with an unexpected pay cut or surprise bill. You can set up an automatic transfer from your checking account to a savings account that happens on paydays. Like a 401(k) account, if the money is taken out before you see it, you'll hardly miss it.

Not sure where to start? Check out Fifth Third's personal finance and savings app for additional guidance.

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