How to protect your finances from the recession

Candy Valentino remembers times of financial uncertainty. Growing up as the daughter of two teenage parents, her father an auto mechanic, her mother a housekeeper, money was often tight, she says.

As a teenager, “I would watch my parents work so hard and I started thinking about what it would be like to be the person who owns the building instead of the person who rents it or works there.”

Valentino became a real estate investor and entrepreneur, as well as a guide for those looking to build wealth. His recent book, “wealth habits”, offers a guide to achieving financial independence, and will soon offer a similar online course.

But Valentino knows that it is difficult to create wealth if you have an unstable financial situation. Yes one economic fall hits, you could find yourself headed in the wrong direction if you’re not prepared.

“The most important thing we can do to be able to survive any economic downturn, any downturn, is to make small decisions up front so that you never get into trouble where you have to worry about paying for the things you need,” he says. .

Here’s what she says you can do now to protect your finances from the recession.

Diversify your income streams

One of the main dangers of a recession is that companies will be forced to lay off part of their workforce. To prevent the prospect of job loss from derailing your finances, look for multiple ways to generate regular income, says Valentino.

And make sure they are from a wide range of sources. It’s the same logic that applies to building an investment portfolio: By spreading your bets, you reduce the chances that a downturn in any particular type of business could put a dent in your plans.

That may mean finding a side hustle that isn’t affected by the same factors as your full-time job.

“Make sure that [your income streams are] Not everything in a similar or related industry is key, so if one market goes bad, like, say, you have a lot of real estate and the real estate market starts to go bad, you have income in another way from another type of source.” Valentine says.

Live within your means

As a guideline, Valentino suggests putting at least 20% of your income into savings and investments.

“If you think, ‘Oh my gosh, there’s no way I can do that,’ that’s the number 1 indicator that tells you that you’re living beyond your means,” says Valentino. “If you can’t save and invest in yourself first, then all these depreciating assets—the bags, the cars, the fancy shoes—are the physical representation that you’re living beyond your means.”

Valentino’s point is that if you find that you’re spending almost all of your paycheck each month, you’re walking a tightrope. If the economy goes south, he could find himself mired in debt to continue financing his lifestyle.

Of course, you may have trouble saving even if you’re not shopping for shoes and trips to Europe. In those cases, you have two options, Valentino says: “You can either decrease your expenses or increase your income to boost that bottom line.”

If you’re already working hard and your budget is tight, the prospect of increasing your income may seem onerous or unattainable. If that’s the case, try thinking outside the box of what a side hustle can look like, says Valentino.

“It’s amazing how people can sell knowledge. There are courses on breastfeeding and how to help your child walk earlier, ”she says. “These are things that most people think: ‘Oh, I have no talents or abilities, I can’t do something like that.’ But anyone who has lived any amount of time in her life has experience of something.”

Do you want to earn more and work less? Record free Virtual event CNBC Make It: Your Money on December 13 at 12 pm ET to learn from the masters of money how you can increase your purchasing power.

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