Money expert Clark Howard is urging Americans to “prepare for the worst and hope for the best” when it comes to the coronavirus outbreak.
With the economy already taking a hit, Clark says it’s important for workers to think about something uncomfortable: What would you do if you were laid off from your job?
Coronavirus & Your Money: 3 Steps to Take Right Now
“Where we stand today, we’re going to see layoffs coming. And you have to be prepared for that,” Clark says. “The industries affected at first are pretty clear: the travel industry in all its phases, the meetings and conventions business in all its elements. These things that involve people coming together will be heavily affected.”
Clark wants you to make a plan, not panic. The reality is that the coronavirus crisis will result in smaller paychecks or no paychecks for some Americans.
Here are three things you can do right now to prepare for a recession…
1. Build a Cash Reserve
If you aren’t tracking your expenses, start now with Clark’s budgeting method. You’ll quickly see where you’re wasting money.
For those who are trying to build a cash reserve in a hurry, focus on eliminating expenses from your monthly budget. A good exercise is to review your recent transactions and separate the “needs” and “wants.”
- Subscription that you don’t use? Cancel it.
- Fast-food lunches? Bring your own lunch to work instead.
- Expensive hobby? Take a short-term break.
Remember, this is a temporary situation. You don’t have to eliminate these little luxuries for the rest of your life.
I also suggest that you create a separate bare-bones budget to determine the absolute minimum you need to get by. This includes just the basics like your rent/mortgage, utilities, groceries, etc.
Add up the list of “needs” and you’ll know how much money you’ll require to survive month-to-month if you’re unemployed.
2. Pay Off Consumer Debt
The second step to prepare for a recession is to pay off consumer debt if you have it. If your hours are reduced or you lose your job, it’s going to be harder to pay those credit card bills.
While you’re still employed, pay more than the minimums and follow our step-by-step guide to getting out of debt.
Think about it this way: If this turns out better than we expect and you’ve taken the precautionary step to pay down debt, your financial life will be healthier moving forward anyway.
3. Avoid Making Big Purchases
Finally, the third thing that you can do right now is to put off any major purchases. This ties in with Clark’s advice to build a cash reserve and avoid consumer debt.
“Unless you are sitting there with tons of cash, you don’t want to be in a position where you’re taking on new debt obligations. I don’t care how good the deal is — and I’m the deal guy,” Clark says. “Don’t buy deals that would put you into debt.”
The coronavirus crisis will eventually pass, and there will still be deals on those big ticket items on your list when this is all over.
By following these three steps, Clark says you’ll be better prepared to handle the economic fallout from the coronavirus outbreak. You can visit clark.com/coronavirus for updated financial-related information that you can trust.