Here it is, the infamous word: debt. Most people have debt, which means many people are in the same boat.
Some people can afford debt more than others, but during a recession, more and more people can no longer afford to make payments on all of the debt they owe; this is partly because people regularly spend more money than they bring in. So as the months and years go by, people continue to accumulate debt without giving it a second thought until something like a recession happens, and they lose their jobs or primary sources of income. Consequently, they can no longer afford the minimum payments for all of their debts.
During a recession, it is essential to ensure you are still paying down your debts and making at least the minimum payments. You can also be proactive and have a discussion with your creditors to see if you can defer your payments if you are unable to afford them, but in case they do not approve your proposal, be prepared to make your payments. If you miss payments, it will negatively affect your credit for years on end.
:: Step 1
Determine the amount you owe in debt payments per month and how the rest of your bills stack up; this is something you will do when you create and review your budget.
:: Step 2
Ensure your debt payments automatically withdraw out of your account, so you are not concerned about missed payments and late fees.
:: Step 3
Whichever debt has the smallest balance, pay extra on that bill to pay it off quicker.
:: Step 4
Once the smallest debt is paid off, continue to follow the same process for all of your other debts in order from least to greatest.
Just because a recession is taking place does not mean you should stop improving your financial situation by paying down your debts. Stay the course, and stay focused. Keep your debts low or non-existent, and never miss payments.
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