Tips to prepare for a Canadian recession
The failing Canadian dollar and another cut to the benchmark lending rate has left many financial experts fearful that our country is quickly heading into a recession.
According to one article predicting financial doom and gloom:
- Canada’s lowered bank rates will spur a recession;
- The coming recession will be worse for the Canadian middle class than 2009 was for the US; and
- Nearly all middle class families in Toronto and Vancouver will soon find their debt worth more than their property.
Canadians can expect “recession” to be the headline buzzword over the coming months, highlighted by stories about unemployment and high-level financial jargon.
For Jeff Schwartz and the team at Consolidated Credit Counseling Services of Canada, the real story in any recession is how families can do their best to carry on and stay afloat in hopes that the economy will turn around.
“The simple truth is that many families may not be able to avoid the effects of a recession,” says Schwartz. “But they can make changes today to improve their situations and prepare for an uncertain financial future.”
To help families prepare for the economic uncertainty that lies ahead, Schwartz and the team at Consolidate Credit offer these tips:
Get out of debt – If you are carrying a rather large (or unmanageable) debt load, you will potentially be in a great deal of financial trouble if the economy slips into recession. Creating a plan and working diligently to pay down your debts today will leave you less vulnerable if you should experience job loss in the future.
Start an emergency fund – Most financial experts agree that you should have an emergency fund that covers 3-6 months’ worth of living expenses. This should include housing costs, food, transportation and debt payments. In anticipation of an economic downturn, it’s wise to increase your emergency fund to cover upwards of 12 months’ worth of expenses. This could potentially protect you from taking on more debt should your situation change.
Reduce your expenses – Even if we are not hit by a major economic crisis, it is always wise to find ways to reduce expenses. Take a close look at your budget and identify areas where you spend more money than you need to. We all spend money on things we don’t need. Those that change their spending behavior and reduce these discretionary expenses will likely do much better in an uncertain economy.
Reduce your dependence on money – This may seem next to impossible in our consumer driven world, but one way to keep your head above water during tough economic times is to provide for your family needs without spending money. Things like growing your own food, taking part in clothing swaps and using alternate forms of transportation (walking, biking and taking public transit) can reduce your dependence on consumer goods, improve your health and meet some of your family’s needs when money is tight.
Create and live on a budget – This last step is probably the most important. A budget is the most essential tool you have to help you differentiate between wants and needs. Being diligent about your spending and saving parameters will not only help your bottom line, but will also help your family make better financial decisions. Living off a lean budget will be your best line of defence in uncertain economic times.
If you’ve already found yourself struggling to tread water in the current economy, and don’t want to drown under a pile of debt, we can help! Call today to speak to a trained credit counsellor and find out how you can get your budget under control. You can also try our Free Debt Analysis online and a counsellor will reach out to you.