Preparing for a Recession

There seems to be a real shift coming in our economy, the US Fed has been working hard to curb inflation by increasing interest rates and those efforts are starting to work. There has been some stress in our banking system, companies have begun to pull back on hiring, and prices of goods are coming down, albeit slowly. Many financial advisors expect a recession by the end of this year.  I don’t believe that this will be anything like the great recession in 2008, however, it’s a good idea to start thinking about things now and work to mitigate damage to your financial well-being. 

Preparing for a recession is vital to make certain that you can weather any financial challenges that may arise. Here are some steps you can take to prepare for a coming recession:

1. Build an emergency fund: Having an emergency fund with 3-6 months of living expenses can help you survive a recession without having to rely on credit cards or loans.
2. Consider increasing your savings, and emergency fund.
3. Get a side gig for a bit to accomplish this.

• Reduce debt: Paying off high-interest debts, such as credit cards, can help free up cash flow and reduce financial stress during a recession.
• Consider a consolidation loan so you have just one payment for your existing debt. 

• Diversify existing investments to minimize losses: Having a diversified investment portfolio can help you minimize the risk of loss during a recession. Consider investing in a mix of stocks, bonds, and cash.

• Cut expenses: Cutting back on non-essential expenses, such as dining out or luxury items, can help you save money and reduce financial stress during a recession.
• Cancel subscriptions, reduce phone apps you are paying for
• Reduce energy usage
• Shop around for cheaper car and homeowners or rent insurance
• Eat at Home
• Change your phone plan
• Evaluate your streaming services, is cable now cheaper? 
• Give up your gym membership
• Bring lunch to work 

Stay informed: Keeping up with economic news and trends can help you prepare for a recession and make informed financial decisions.

• Seek professional advice: Consulting with a financial advisor can help you create a plan tailored to your specific financial situation and goals.
• Think about what you would do for a career if you are laid off, update your resume, and consider taking classes to update your skill set. 
• Stay Calm and think things through. Don’t make any big immediate changes, assess your budget and create a backup plan. 

Many of these steps can help you to weather the coming recession and will help to create a financial strategy for the future to come. Budgeting, creating or adding to your emergency fund, and cutting expenses are skills you can use throughout your life to weather crises.