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Most economists now expect a recession to impact jobs and incomes in the U.S. by 2024. If you’re trying to change your spending and saving to prepare, you wouldn’t be alone — 74 percent of Americans are changing how they manage their finances to prepare for an upcoming economic downturn. Economically vulnerable populations like women, minorities and low-income workers feel even less prepared for an upcoming recession.
A recent Bankrate poll asked U.S. adults about their preparedness ahead of a recession before the end of 2023. These statistics break down how different people are trying to tackle their budget:
Key money management statistics
- 47% Americans are spending less on discretionary purchases.
- 35% are saving more for emergencies.
- 30% are paying more down on credit card debt.
- 24% are looking for additional or more stable income.
- 48% of total women polled feel unprepared ahead of a recession.
- 38% of men feel unprepared for a recession, in comparison.
- 53% of those making under $50,000 a year feel unprepared for a recession.
- 31% of U.S. adults who feel unprepared for a recession are currently doing nothing to improve their financial situation.
13 ways to manage your money
No one person can out-budget a recession, but there are actions anyone can take to manage money and create better peace of mind. Here are 13 accessible steps to create a money management plan and start saving for the future.
1. Assess your financial starting point
You can’t plan your finances until you know what your finances are. Take a look at any accounts that you have with available funds, such as your checking account, savings and retirement. Then, make a list of your different sources of debt.
Once you understand how much funds and debts you have, you have a starting point. If you have a low income, but a lot of debt that has to be paid off, common savings goals like a year’s salary by 30 may be unrealistic.
2. Organize your bills and due dates
Next, list out each of your monthly expenses, including everything from your rent to internet to streaming services. List the date that each is due so you can be sure you’re paying them on time, or plan for these withdrawals from your account if they are set up for automatic payment. Include minimum debt payments, and make a note of bills that may be paid infrequently, such as twice-yearly car insurance.
An example of this might include:
- Rent, due the 1st of the month
- Credit card minimum payment, due the 29th of the month
- Amazon Prime subscription, due every January on the 1st.
3. Track your monthly cash flow
Looking at a typical month for you, tally up your monthly post-tax income, including any side hustles or passive income. A home budget calculator can help you determine the monthly income you’re working with each month. Then, look at how much money you spent over the past month (which you can do after organizing your bills and due dates), and subtract that from your monthly post-tax income to see your monthly cash flow.
Knowing where your money is going and determining how much you have left over can help you better understand your financial strengths and weaknesses.
4. Consider where you can cut down on spending
Controlling your spending isn’t as simple as not ordering avocado toast. Consider what’s important to you, and what you’re spending money on that isn’t actually a necessity. If you’re a movie buff, keeping a streaming service might be a higher priority than frequently buying new clothes.
These are common ways anyone can cut down their spending:
- Make your utilities more efficient by fixing leaks or switching light bulbs
- Plan your meals and cut food delivery
- Shop around and compare quotes on phone plans or utilities
5. Set up a realistic budget that works for you
It’s easy to think you’ll aggressively save and cut out discretionary spending entirely when you’re worried about your budget, but keeping a realistic budget isn’t just good money management — it’s good for your mental health.
The 50/30/20 budget is a popular budget template, though it may not work for every financial situation. It splits up your spending, whatever your bills might be, into clear categories. See the breakdown below:
|Percentage of your income||May go toward:||May include:|
|20%||Savings and/or paying off debt||
6. Set short-term savings goals
As you begin to save for short-term goals, start with small, accessible goals that you can meet in around six months to five years. Pick goals that are specific and attainable — setting aside a little each month will make that pinch in an emergency much less anxiety-inducing.
Specific goals might include saving for:
- Three to six months of emergency savings
- A wedding
- A large vacation
- A deposit for a new apartment
7. Set long-term savings goals
Next, visualize what you will likely be spending on in the future. Set long-term savings goals that won’t be met for at least five years, but that are important to begin saving for now. Keep in mind that as life changes, these plans can change, and you’ll need to adjust your savings accordingly.
Specific goals might include saving for:
- Your child’s education
- Student loans
- Paying off a mortgage
8. Set up separate accounts for financial savings goals
Once you start moving money to savings, it may be a good idea to open multiple accounts depending on your goals and when you expect to need to use the money. Setting up separate accounts can help you know what funds go where, and it lets you prioritize what’s important, without dipping into a new car fund to pay for a vacation.
There are different types of savings accounts for short-term goals, and which you choose will depend on when you intend to use the funds and how much return you’re looking for.
Consider these options:
- A high-yield saving account
- A money market account
- A certificate of deposit account
9. (If applicable) Determine strategies to pay down debt
If you’re juggling private student loans, a car loan and credit card debt, paying it all off in the face of a recession can seem overwhelming. But there are several ways you can start to get out of debt.
- The debt snowball: Build momentum by paying off debts from smallest to largest, and be encouraged while you watch your debts vanish.
- The debt avalanche: Pay off debts from highest interest rate to lowest so that you get ahead of rising interest rates.
- Debt consolidation: Use a personal loan or balance-transfer credit card to help if you struggle with making payments on time, though the interest will be higher.
10. Set up automatic transfers
If you know you will be paying roughly the same amount every month on your bills, and your monthly income is steady, consider paying them through automatic transfers if you don’t already. Then, you won’t need to juggle due dates and worry about missed payments.
You can set up automatic transfers from your checking account with your bank. Use it for rent, insurance and other bills you know will be similar each month. Just make sure you periodically check your bank statement to make sure your rates haven’t gone up without you noticing. Also, remember to cancel payments when you no longer want the service.
11. Consistently practice good credit habits
Good credit will help you open a new credit card, lease an apartment or finance a car, without sky-high interest rates.
The best ways to improve your credit score and keep it high are to pay bills on time and keep credit utilization low. Credit utilization is the balance on your credit cards versus the credit limits, and you want it as low as possible. Use automatic transfers to make sure you’re paying your bills at the same time, every time, and try to avoid applying for new accounts too frequently.
12. If you haven’t already, start saving for retirement
Even if you’re young, you should consider how to save for retirement now. Common estimates say you might need between eight to 10 times your salary by age 67, but you can use a retirement calculator to build a more accurate picture for your lifestyle.
These are some of the most common types of retirement accounts:
- A 401(k), which your employer can match.
- A traditional IRA, which can be deducted from your income taxes.
- A Roth IRA, which allows you to invest after taxes and take earnings tax-free when you retire.
13. Set up a money management routine that works for you
Every person has a different budget and different priorities, and no financial advice will work for everyone. Make your goals adaptable for you. You can set budgets and goals ahead of the upcoming week, month or any other time frame that works best. At the end of every month, review your budget and examine your savings and spending, while adjusting to meet your goals.
Creating healthy financial habits is a challenge, and it may not happen overnight. But making these changes is the first step to financial wellness that will set you up for years to come.
FAQs about managing finances
Bankrate.com commissioned YouGov Plc to conduct a survey of Americans in order to assess their feelings toward a possible recession before the end of 2023. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,390 adults. Fieldwork was undertaken between July 27-29, 2022. The survey was carried out online and meets rigorous quality standards. It employed a nonprobability-based sample using quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results.