A recession is typically defined as two consecutive quarters in which there is a considerable slowdown in economic activity. A number of economists and financial professionals in the United States are predicting an upcoming recession for the country and the world. All of the previous recessions were characterized by widespread layoffs, increases in the price of borrowing money, and volatile stock markets.
Put your attention on the aspects of the situation that are under your control, acquire information, and take steps to safeguard your cash. Above everything else, it is important to keep one’s composure.
There is no question that a recession is in our near future. The only thing that is unsure is when it will happen, where it will happen, how long it will last, how severe it will be, and how the government will react. Because economies are cyclical, with upswings and downturns, there is always the possibility of a recession occurring in the near future.
When we are in the thick of things, it is difficult to get a clear picture of what is going on around us. All we can do is look behind us. Since the Great Depression, the United States economy has been through over a dozen recessions, each one lasting anywhere from a few months to over a year and sometimes even longer.
The details of the upcoming recession are impossible to predict, and anybody who tries to convince you otherwise is probably trying to sell you something.
Right now, the greatest thing we can do is look back on the past to get some perspective, become more proactive with regard to the monetary movements that are within our power, and fight off the desire to panic. As part of this process, we will examine what transpired during prior recessions and take a more in-depth look at our financial objectives to determine which financial levers to pull so that we can remain on track.
The following are eight particular measures you may take in order to establish greater financial stability and resilience in the face of an unstable economy.
PANIC LESS
The fact that these expectations for an upcoming recession are still only forecasts is the sole silver lining to the present economic situation. It is possible to put together a strategy without being burdened by the significant demands and difficulties that come with being in the midst of an economic slump. When your adrenaline isn’t pumping as fast, it’s a good idea to revisit your financial plan and sketch out some worst-case scenarios over the next couple of months.
FOCUS ON YOUR CASH RESERVES
Having cash saved up in the bank is one of the most important factors in coming out of a recession relatively undamaged. Think about reworking your budget so that you can put away more money into savings right away and get closer to the six-to-nine-month emergency fund that is suggested.
DETERMINE A SECOND INCOME STREAM
Web searches for “side hustles” are prevalent at all times, but they are particularly popular right now as many people attempt to diversify their income sources in preparation for a possible economic downturn. Diversifying one’s income streams, in the same way, that it is beneficial to diversify one’s finances, may lessen the income instability that comes with the loss of a job.
AVOID IMPULSIVE MOVES
In the event that you have not yet registered for automatic rebalancing, you should talk to your portfolio manager or online broker about the possibility of doing so. Regardless of how the market fluctuates, this tool gives you the ability to keep your instruments’ weightings consistent with your risk tolerance and the investment objectives you’ve set for yourself.
LOOK OUT FOR INTEREST RATES
The interest rate will go up when monetary policymakers decide to hike interest rates in an effort to bring inflation levels down due to the upcoming recession. Anyone who currently has a loan with an adjustable-rate might be in for some unpleasant news as a result of this. Those who are carrying a balance on their credit card face additional difficulties as a result.
SECURE CREDIT SCORE
Work toward paying down high balances, review and dispute any errors that may be on your credit report, or consider consolidating high-interest credit card debt into a lower-interest debt consolidation loan or a balance transfer card with an introductory APR of 0% in order to improve your credit score.
DON’T THINK OF BUYING A NEW HOME
The property market is already very competitive, and there are not enough houses to go around. If increasing mortgage rates are making it more difficult for you to purchase a house within your budget, you may want to think about extending the amount of time that you remain a renter. If you are also concerned about your job stability. In the event that there is a recession, then there is an additional reason to take a moment to reflect.
At the present time, leasing is not inexpensive; nonetheless, it might provide you with more freedom and mobility. Because renting doesn’t require you to save aside money for things like a down payment or closing expenses, it might help you maintain greater financial flexibility during times when the economy may be unstable.
TAKE CARE OF VALUABLES
As a result of persistent problems with supply chains, many of us are forced to contend with increased costs and delivery times when purchasing new automobiles, technological goods, furniture, building materials, and even contact lenses.
This also includes any necessary replacement components. Be sure to sign up for a free warranty if the device you purchase comes with one. And if the cost of extending the insurance policy is negligible, it would be worthwhile to do so during a period in which prices are trending upward.
