How do I protect my finances?

When the economy is uncertain, you'll be better able to weather any storm with a smart financial plan.

Two little boys are sitting on the floor protecting their finances by placing the coins in jars.

The economy can bring about plenty of uncertainties, but you may be better able to weather potential storms if you have certain financial safeguards in place. Here are some suggestions that may help you maintain a solid financial footing.

What should I do?

  • Pay off debt. As challenging as it may be, make debt reduction one of your top priorities — particularly credit card balances with high interest rates.
  • Consider refinancing your home. While mortgage interest rates are still low, you may want to lock into a fixed rate loan.
  • Look for ways to scale back. Consider moving to a smaller, more affordable home or apartment. At the same time, sell possessions that you no longer use — such as an exercise bike or collections of items that no longer interest you — and save the money.
  • Try to live on one salary. If you and your partner are both employed, challenge yourselves to live on one income and put some or all of the rest in savings. Be sure some of that money is deposited into accounts that are accessible for emergencies.
  • Negotiate. It doesn't hurt to ask for lower rates on credit cards and for discounts on merchandise. If there are sign-up fees for a particular service, see if that fee can be waived. In lean times, some retailers will agree, just to keep you as a customer.
  • Pay cash for purchases. Spend only what you have on hand right now. Put off purchases that require you to add to a credit card balance until you have saved to cover the cost.
  • Enrich your salary potential. Learn new skills, ask for more responsibilities at work or even start a small part-time business. In a downturn, the expertise you bring to a position may help make you invaluable to your company — or give you options should you be downsized.

What should I avoid?

  • Raiding your retirement account. You'll typically pay a 10% federal income-tax penalty for removing the funds early, and you'll shortchange your future.
  • Letting insurance lapse. Keep your home, disability, life and car insurance coverage current. If something happens to you during a down time, you'll need that protection.
  • Co-signing a loan. It's risky unless you're sure you can shoulder the entire burden yourself. Even if the co-signer is trustworthy, there's no guarantee he or she won't default.
  • Taking on additional debt. Thoroughly evaluate any outlay that results in debt. A student loan for your child may be a reasonable debt — but a big credit card expense is not.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

State Farm® and its affiliates do not provide tax, investment, or legal advice. Federal and state tax laws are subject to change. If tax, investment, or legal advice is required, please seek the services of a licensed professional.

Start a Quote
Select a product to start a quote.
Agents Near You
Contact Us

Also important

Are You Better Off Paying Down Debt or Investing?

This calculator may help you decide if paying off what you owe, or investing your money and letting it grow, is the right strategies to meet your financial goals.

Ways to Save Money

For young adults, finding ways to save money while still enjoying their social lives can be a challenge. These small adjustments can help.

Related articles

Methods and Strategies for Breaking Down a Budget

You can have a budget – and still live the life you want to live.

How to Get Out of Debt

There are a lot of reasons we go into debt. Read these tips to begin saying so long to yours.

Financial Wellness Tips for a Positive Financial Future

Financial wellness means controlling debt, spending less and saving more. Follow these steps from State Farm to improve your financial future.