Recession-proof: You want flexibility. Live below your means. Don’t sign up for new debt.

by tomatuvm

It’s easy to get into the budgeting via monthly budget way. But you gotta remember what happens if it all goes away.

For example, let’s say your loan payment is $1000/mo. And you get a job taking home $5000/mo. It’s easy to say “oh, I can afford a $500/mo car, a $2000/mo apartment, $1000 on food and partying, $500 on savings/miscellaneous”. But then if you lose your job, you don’t have much you can cut back on. If you can cut your savings and food/partying down, you still need to come up with $4000/mo to just get by. And if it happens 6 months into your job, you’ll only have $3000 saved, at most. You won’t even make it a month, and might be forced to take jobs or side gigs you don’t want to take.

But if your car is paid for in cash, you split an apartment with 4 people and only pay $500/mo, keep your food/partying budget to $500, and shove the rest towards savings, if you lose your job in 6 months you’ll have saved $18,000 and only have like $2000 in bills you need to hit every month. You’ll be able to go 9 months without worrying.

Having that flexibility will allow you to take time finding better jobs, move across the country if a new opportunity arises, take classes while unemployed, etc, etc, etc.

Also, others will say max your student loan payments each month. If your interest rates are low enough, you could consider shoving as much money into a student loan and emergency account instead. If you have an emergency, you can use it. If you don’t, you can push it all towards your student loans at the end of the year. It may cost you a bit in interest, but the flexibility will be priceless if you ever need it.

 

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