A recession like the one we’ve been in doesn’t come to an end all at once; the economy gradually moves out of its funk, and the changes might not even be noticeable until one day you realize that things are already better. While this can provide some peace of mind, it is important not to get carried away. With improvements becoming more apparent in the economy, it can be tempting to begin abandoning some of the money practices you adopted out of necessity during the recession.
Don’t. Now is the time to learn from the past, and make sure you are prepared for the future. There will always be another recession at some point down the road. (Isn’t that fun to look forward to?)
Retaining Your Good Money Habits
The recession saw many people getting back to the basics of good money habits. It is important to maintain these good habits even during the best of times. That way you won’t have to drastically change what you’re doing next time we see tough economic times. Here are some of the good examples, even though you might not think it’s strictly necessary:
- Emergency fund: Keep your emergency fund up to scratch. Indeed, you might want to build it a little more. Many found that three to six months of expenses was insufficient, due to the tough job market. Now that times are better, it might still be worth it to build your emergency fund up to something closer to nine months to a year of expenses. Like the old saying goes “better safe than sorry”.
- Retirement: Continue funding your retirement account. What happens if a recession strikes after you retire? Build up what you can now. If you can spare a little more, consider putting more money into your retirement savings.
- Keep the plastic on ice: Many people stopped using credit for purchases during the recession, and made serious headway in paying down debt. If you are one of those, now is not the time to start using credit again to buy things you can’t pay for right now. Yes, credit card offers are starting to reappear in mailboxes, but that doesn’t mean you should apply. Continue saving up to buy big ticket items, and continue paying down your debt. An improved economy is not a sign that instant gratification is an acceptable money habit.
- Live simply: Many families discovered the joys that can be found in simpler living. Continue engaging in the fun and frugal activities you amused your family with during the recession. While you might be able to throw in an extra trip to the movies on occasion, there is little that can compare, in terms of quality time, with an inexpensive family activity that requires you to interact with each other.
- Cook at home: My husband and I have added another lunch date to the month since things have become a little better in terms of finances. But we’re not going crazy. We discovered that we can save money — and eat healthier — by cooking at home. If you’ve been planning your meals and eating more at home, continue to do so. Bonus points if you started a garden and maintain it all by yourself, allowing you the opportunity to cook meals using fresh ingredients.
While it can be a relief — not to mention enjoyable — to spend a little more money now that things are starting to look a little more secure in terms of finances, don’t return to your pre-recession financial habits. Instead, try to preserve the changes you made during the recent tough times. It will put you further ahead during the good times, and help ensure that you are adequately prepared for the next difficult time.