The weight of the recession is on most people’s minds these days. Unemployment is rising, businesses are going under, and consumers are more guarded than ever about the way they spend their money.

Fortunately, there’s a silver lining. For starters, these dark times won’t last forever – particularly if the hefty bailout plans coming from the government are put to good use. On top of that, the troubled economy has set the ideal stage for consumers to tackle their own financial woes. In effect, now is the time for you to create your own bailout plan.

Why you should jump to create your own bailout plan

A personal bailout plan is a safety net. By putting one in place, you can ensure that you won’t be affected by any unexpected, adverse conditions. If you effectively manage your own bailout plan, you won’t have to live in fear of unforeseen expenses. You won’t have to worry about losing your job. You won’t even be negatively affected if another recession hits. By taking charge of your financial health, you will be equipped to take charge of your life.

The first step

Without question, the first step to creating your own bailout plan is to understand where your money goes. You need to have some way to track how much money comes into your house on a monthly basis and where that money goes. Call it a budget, a record, or simply deliberate planning – whatever your preferred term, just make sure you do it regularly.

There are countless ways to keep track of where your money goes, starting with basic pen and paper and going all the way to elaborate computer programs that download your transactions directly from your accounts. Choose whatever method you’re most comfortable with and make it a regular habit.

Cut unnecessary spending

As you become comfortable with tracking your regular expenses, you’ll begin to see where and how you can save money. You may be shocked to discover how much of your income goes to dining out or to purchasing new clothes. Cut back on these expenses, and then look at areas where it’s become a habit to spend money. For example, consider whether you really need cable television. See if you can move to a cheaper cell phone plan or switch to a prepaid plan.  

Cut back to only the essentials and use the extra to tackle your existing debt.

Tackle existing debt

Thanks to the government bailout plan, relief may be easier to find when it comes to cutting costs on large debt loads. Consider taking these steps:

• Look into refinancing your mortgage. If you have a decent credit rating, you could take advantage of the historically low mortgage interest rates that have dipped down to as low as 5%. Alternately, consider taking out a home equity loan at a low rate in order to cover your debt.
• Adjust your car payment. If you have an auto loan that is over 8%, chances are good you can either refinance the loan or work with your lender for a better rate.
• Pay off all credit card debt. Use whatever extra money you can spare each month to tackle existing credit card debt. Transfer your balances to the lowest rate cards you can find and then proceed by paying off the higher interest cards first.

Create an emergency fund

To successfully create your own bailout plan, you must build an emergency savings account. This step is just as important as curbing your debt; both acts should be done in tandem. As you track your finances and begin to understand where you can save, make it a habit of regularly putting a small amount of money into an easily-accessible savings account. Aim to save enough to cover six months’ worth of living expenses.