- A recent survey found that 74% of consumers are concerned about a recession.
- The article recommends five steps to prepare for a potential recession:
- Build an emergency fund
- Pay off high-interest debt
- Reassess your investment portfolio
- Look for ways to increase your income
- Cut back on non-essential expenses
- The article also provides some tips for navigating a recession, such as focusing on long-term goals, staying calm, and avoiding panic-driven decisions.
If you turn on any news station that talks about the economy, you’re bound to hear at least one person mention the likelihood of a recession. If you haven’t thought about the risk of one, you’re in the minority.
According to the University of Michigan, Consumer Sentiment (an economic indicator that measures how optimistic consumers feel about their finances and the state of the economy) is at the lowest point its been since before the 1980s. In addition, nearly 85% are worried about inflation and about 56% are already seeing their standard of living declining, according to the survey of 2,000 U.S. adults, conducted by The Harris Poll between April 19 and 23.
At Progress Wealth Management, we’ve got multiple clients who needed help solidifying and adjusting their budgets given the higher cost of living we’re all seeing everywhere. The fact of the matter is, we’re all feeling the pinch.
While experts are quick to point out that downturns are a normal part of the economic cycle, you should still be prepared when one occurs. The question is, what should you do to prepare?
The odds of a recession vary, depending on whom you ask, with Goldman Sachs pegging it at a 30% probability within the next year and UBS standing by its base-case forecast of “no recession.” Meanwhile, Ark Invest CEO Cathie Wood and Wharton finance professor Jeremy Siegel believe the U.S. is already in an economic downturn.
Whether a recession is near, or a bit further away, here’s what you can do to prepare.
1. Update your resume and reconnect with recruiters that specialize in your industry
The labor market has been definitely in favor of job-seekers lately. As you can see in the chart included below, the number of openings is among the highest its been in over 20 years. Don’t be fooled; this will change as soon as the recession hits.
“It’s important to prepare for less job security and a more difficult market to find jobs in.” our founder, Blaine Thiederman, says. “If you don’t start preparing just in case, you may regret it.”
“People have to prepare for less overall job security,” Deer said. “With employment being at all-time highs, naturally employment will decrease.”
There are a few key things you can do to prepare for less job security. They are:
- Update your resume.
- Connect with independent recruiters in your industry.
- Get a new skill and become a more well-respected professional in your industry.
Long story short? It’s important to prepare for the worst-case scenario otherwise you might end up regretting it.
2. Reduce expenses, especially those that are fixed.
Start to look at where you can cut back on spending, Blaine suggested. Think about where you want your budget to be for a worst-case scenario and a best-case scenario, she said.
“You have to think about the ‘what ifs,’” Blaine said. “What if my income goes down? What if my car breaks down? What if my rent goes up?”
This is why it’s so important to try and make your fixed expenses lower. It’s much easier to better control your spending if your rent, debt payments and and and are all less.
3. Make building a healthy emergency fund a high priority
At Progress Wealth Management, we recommend having enough savings to cover at least three to six months of your minimum expenses. That could be worth revisiting depending on your specific circumstances.
If you have a skill set that’s in lower demand and a large amount of debt, it’s possible you may need more because it could take much longer than 6 months to find new employment in your field.
Be conservative with your estimate.
4. Pay down debt
If you are carrying any high-interest-rate debt, start focusing on paying it down, Blaine recommends. Also, if you have any debt with costly monthly payments, make paying those down a high priority as well. Why? By paying those off, you’re preparing for the worst. Your emergency funds will last that much longer if you don’t have to spend them to make payments on your debt as you wait for a new job to come on by.
5. Stay invested
Recent market volatility may have you considering cutting back on your 401(k) or getting out of the market. However, it’s important to keep your emotions in check and remember that you’re in it for the long term.
“The most important decisions in life require a clear head. Investment decisions require you to be objective, thoughtful, and rely on empirical evidence” Blaine said. “avoid watching the news and instead, find experts that you can trust to guide you if you need help.”
In fact, history shows that bull markets last longer than bear markets, Blaine said.
“Economic growth is the long-term trend,” he added. “This is just a hiccup in that trend.”
If you’re concerned with a recession and don’t know how to prepare, scroll down and schedule a free call and we’re happy to help.