It's been more than a decade since there was a big market correction. But the negative effects still linger for many. It's uncertain when another one will occur, but it's wise to make sure your financial affairs are in order. This will help you to get through the down times — whether you work fewer hours or lose your job. Here are four things you can do now to ensure you're prepared:
1. Get On A Written Budget
You need to know how much money you have coming in and going out. You might think that a dentist visit is more appealing than creating a budget, but it's not difficult. Add up all your expenses. Subtract them from your income. If you have a surplus, that's great. If not, you need to look at areas where you can tighten up your spending.
2. Cut Expenses
How ruthless you are at cutting out expenses depends on how much extra you have left over after your bills are paid. If money is tight, cut restaurant spending, clothing, travel, subscriptions, and any other extra costs. Check your credit card bills to find unused subscriptions and memberships. Cancel them immediately.
3. Review Insurance Policies
You shouldn't be canceling your life insurance policy, but you do need to review it. Also, check to ensure you have adequate amounts of coverage of home and auto insurance. You might also might consider bundling policies to save money.
4. Stockpile Cash
When markets take a dive — no matter how small — people are tempted to cash out their money. Don't do this unless you will be needing the money within the next three to five years. Now's the time to think about your future cash needs. Do you have kids going to college? Are you planning to buy a house? Will you need this money for retirement? If so, you might take out some money and keep it in a CD or savings account. In the meantime, stockpile extra money so that you have enough, and won't need to touch your investments when they're down.
Of course, no one knows when the next downturn will happen. The United States has enjoyed a long period of growth, so some say that it's about time for a correction. Use these tips to prepare yourself financially.