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How to Survive a Recession by Avoiding These Money Mistakes

May 21, 2020 3 mins

Whenever there’s a recession or an economic downturn, many people are understandably worried about their finances and the future security of their income. It may feel as if you need to make drastic changes to your finances. While some changes may be necessary, it’s never a good idea to react in a state of panic. Here are five things you should avoid doing with your money to survive a recession or economic downturn.

1. Making rash decisions with your stock investments

Whether it’s cashing out your stocks or making a big bet with the hopes of capitalizing on the downturn, now is not the time to make an investment decision without careful consideration. The economy works in cycles. If you had previously invested in stocks with the intention of playing the long game, try to stick it out with the majority of your holdings. If you have never invested in the stock market, now is not the time to gamble your cash savings in an attempt to capitalize on the market swings. Remain calm and be thoughtful with your investments.

2. Cashing out your 401(k)

If you are many years away from retirement, do not stress out about the dip in your retirement savings. The economy works in cycles — it dips, it crashes, it bounces back, it soars, and everything in between. Stay the course and remain disciplined with keeping your 401(k) investments in your account. Pulling out your money will trigger heavy fees, and you may regret the decision later in life.

Alternately, if you are close to retirement, this may be a time to consult with a financial advisor to get personalized information on the best course of action. At Patelco, we offer support to our members looking to invest — you can schedule a complimentary meeting with any of our experienced CFS Financial Advisors.1

Your emergency savings fund is the most important factor in your financial wellness — more than any other financial measurement, including your retirement savings and investments."

3. Making big purchases

For some people, it may be absolutely necessary to take out a loan for a car or other large purchase during this time. But while there are many deals to entice you to make a big purchase, it could be devastating to take on a large monthly payment and later lose your main source of income. Proceed with caution during this time and be mindful with your spending.

4. Draining your savings to pay bills or debt

Cash savings is one of the foundational elements of your financial wellness. In fact, your emergency savings fund is the most important factor in your financial wellness — more than any other financial measurement, including your retirement savings and investments. If you are struggling with bill payments or feel crushed by debt, work with your providers to come up with a plan that does not place you in a vulnerable cash position.

5. Avoiding your bill collectors

If you are behind on bills, you may feel overwhelmed and stressed to the point where you may avoid calls from bill collectors. However, avoiding the situation will only make things worse. Your service providers want to work with you. Reach out and communicate with them. Together, you and they will be able to create a win-win solution. Patelco can help too — even if we’re not your lender, we’re here to offer advice: set up a confidential one-on-one call with one of our Certified Financial Specialists.

1 Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Patelco Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.


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