The global pandemic of COVID-19 has brought forth one of the most unique recessions in modern history. Many investors lost a significant portion of their wealth through volatility in the stock market. Unemployment rates reached their peak at 15%, while some experts believe that number may have been larger.
Those who saw their net worth decline during this period are now struggling to regain what was lost. Jason Kulpa, net worth expert, and serial entrepreneur discusses a handful of tips on how to recover after a financial crisis and protect yourself and your family for future recessions.
Reduce Debt Obligations
When there isn’t enough income to support expenses, many people turn to credit cards, lines of credit, or loans to help get them through downtimes. While borrowing money can help you survive a recession and make ends meet, those debts will ultimately need to be repaid. As people return to work, one of the first steps in recovery is to pay down debts, especially those with high-interest rates.
Increase Savings
Some say cash is king during financial downturns. However, when a job loss occurs, people often burn through any savings they have quickly. When recovering from hardship, individuals and families should focus on replenishing their savings just as much as paying down debts. Boosting your emergency savings account will help prepare both you and your family for any future recessions and ensure you have the funds you need to get by.
Change Your Spending Habits
During times of stress, it’s essential to examine how you spend your money. When things get tight, it can be a good reminder of what spending is necessary. As you emerge from a recession and things return to normal, that doesn’t necessarily mean you should go back to indulging every whim. Focusing on what items you truly need versus what is nice to have can help make those funds stretch further.
Budget to Your Means
Like adjusting spending habits, one crucial way to ensure financial success regardless of the economic state is to create a budget within your means. Items like housing, transportation, and food are essential to living; however, precisely what that looks like can shift with your net worth. If you can no longer afford to live in the house you are in, downsizing to a smaller or older home with a more affordable monthly payment may be a way to protect your assets.
Focus on the Long Term
It can be terrifying watching the stock market plunge when a significant portion of your net worth or retirement is tied up in investments. While the downward shift can be hard to stomach, rebounding from a recession is an excellent time to consider shifting additional funds into investments. Investments will always fluctuate over an extended period, but focusing on the long term can reassure that your net worth will eventually rebound and continue to grow as long as you remain invested in the right manner.
About Jason Kulpa
Jason Kulpa is a serial entrepreneur and the Founder and CEO of UE.co, San Diego’s Fastest Growing Business multi-year award winner, and a Certified Great Place to Work multi-year winner. Mr. Kulpa is a San Diego’s two-time winner of the Most Admired CEO Award of the San Diego Business Journal and also a semi-finalist for the Ernst and Young Entrepreneur award. Under Mr. Kulpa’s leadership, in 2018, his teams volunteered at over 24 events and worked side-by-side to improve the San Diego community. They hosted a gala dinner benefiting individuals with autism, cheered on Special Olympic athletes as they broke their records on the track, and brought school supplies and cold-weather gear to students impacted by homelessness. Jason’s mission is to bring awareness, support, and inclusion for special needs causes.