Financial Expert: 5 Things Smart Middle-Class Workers Cut During a Recession
If you’re concerned about your finances or what could happen during a possible economic downturn, it’s essential that you start cutting back now to prepare yourself.
According to a recent Allianz Life study, 67% of Americans are more worried about running out of money than death, a figure that’s up 10% since 2022. The harsh reality is that an economic downturn could have long-term financial consequences, especially if you don’t plan ahead.
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1. Dining Out and Food Delivery
“Restaurant prices have skyrocketed over the last few years, while quality and service have trended down,” said Prof. Dr. Jörn Kleinhans, a certified financial analyst and strategist at Scorpio Tax Management. “Cocktails and a glass of wine are nearly $20 these days.”
With these costs flying out of proportion to income stagnation, it shouldn’t come as a surprise that they’re the first thing a middle-class person should consider cutting when the economy goes down. While it can be convenient to use a food delivery app, there’s a hefty price that comes with having someone bring you that meal to your doorstep.
2. Convenience Shopping
Scott Oosterhouse, a financial expert and the founder of Every Dollar Grows, believes that one of the first things to cut during a recession is convenience spending, from impulsive Amazon purchases to last-minute spending because you didn’t plan ahead.
“Those habits can feel small, but together they can free up a surprising amount of room in the budget.”
Kleinhans said that if you still think you need to order the item from Amazon after 48 hours, then you can go ahead, but you shouldn’t be ordering everything on next-day delivery. Impulse shopping could seem harmless, but the costs add up, and you may be spending hundreds of dollars on items that you didn’t really need in the first place.
3. Ongoing Subscriptions
Kleinhans advises canceling streaming services, gym memberships and software subscriptions. You can cancel first, then add the services back later if you really miss them or can’t live without them. You might even score a deal to retain you or bring you back.
Recurring charges and subscriptions are an easy place to start making cuts because most people don’t even notice these expenses anymore, per Oosterhouse. He believes that autorenewing memberships are the easiest things to trim quickly without hurting your long-term stability, because you may have forgotten about some of these costs.
The experts agreed that one of the main issues in a weaker economy is having too many fixed costs that hold you back from saving. Smart middle-class workers will pay attention to these fixed expenses because they can’t be avoided. For the expenses that can’t simply be cut, like insurance and phone bills, it’s worth reviewing the contracts and trying to land a better deal.
4. Daily Small Luxuries
“Fancy coffee runs, lottery tickets, and convenience services get cut,” said Kleinhans. While these daily luxuries can feel like a nice treat, they aren’t essential expenses, and they could be adding up without you even realizing it. Wise middle-class employees will start making their own coffee at home or think twice before making unnecessary purchases.
5. Lifestyle Upgrades
Oosterhouse said that a recession is a time to pause lifestyle upgrades because you don’t want to overextend yourself. This might mean delaying a car upgrade, holding off on furniture or home projects that aren’t essential or slowing down travel spending. You don’t want to commit to monthly expenses if you aren’t 100% certain that you’ll even have an income in the coming months.
The experts agree that during a recession, the goal isn’t just to spend less, but to lower your stress and protect cash flow so that a rough month doesn’t turn into a financial crisis, which can be challenging to get out of.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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