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How To Prepare For The Next Recession
These six strategies will help prepare you and your finances before the next recession hits.
If the idea of a looming recession makes you nervous, you are not alone. According to a recent survey conducted by Empower Retirement and Personal Capital, a whopping 74% of Americans are concerned about the coming recession and how it will impact their finances. But that doesn’t mean you have to just patiently wait for the recession to arrive and hope for the best. Instead, make a plan that will help you successfully weather the next economical downturn with your finances and sanity intact. Use these six strategies to get on the right track!
Update your resume.
Throughout the summer, the job market has definitely been in favor of prospective employees. At the moment, there are nearly twice as many job openings as there are available candidates to fill the positions. However, that could change once a recession hits. People will need to be prepared for less job security and possible layoffs.
If you end up in a situation where you lose your job, you want to be prepared to dive back into the job market and find a new source of income right away. Therefore, it’s a good idea to make sure you have an updated version of your resume polished and ready to go in the event of layoffs. If you’ve been thinking about going back to school or taking some courses to beef up your resume, now is a great time to do that as well. Get started with some of our favorite courses from LinkedIn Learning!
Get a side gig.
As mentioned above, there are so many jobs open right now that there are not enough employees available to fill them all. If you have the time, now may be a great time to pick up a side gig. Not only will you have an extra source of income to bolster your savings or keep as pocket money, but you will have your side hustle as a backup source of income if something happens to your main gig.
Have a backup emergency fund for your backup emergency fund.
All this talk of a looming recession is a great reminder to bolster your emergency savings fund. In general, financial advisors recommend having at least three to six months of living expenses set aside for a rainy day. If you think you may have a problem with your job or home expenses in the future, you may want to set aside even more.
Additionally, you may want to consider a backup fund for your original emergency savings fund. You need to have a plan in place if you need to access additional emergency funds in a pitch or if something happens to your other savings. You just don’t want to have to resort to going into debt if you lose your job or if your wages can’t keep up with the historically high inflation.
Pay down debt.
In response to rate hikes by the Federal Reserve, interest rates are likely going to get higher before they get lower. And when you don’t pay off your credit card balance each month, your credit card company may be able to charge interest on your remaining balance. Especially if you are carrying any high-interest-rate debt, your focus should be on paying it down as quickly as possible. That said, it’s a good idea for anyone with a credit balance to pay it off as soon as they can.
Don’t run from the stock market.
When people get scared, their first instinct is to cut back on their 401(k) or pull out of the stock market. But experts are advising people to stay invested and not make panic-fueled decisions. Instead, remember that the stock market is a long-term investment and things can still change. This could even be a good opportunity to focus on companies that have strong balance sheets, strong cash flow, and products that consumers are using and need.
Additionally, don’t underestimate the power of having bonds in your investment portfolio. When stocks are down, bonds can help balance out your earnings. And in previous recessions, bonds have held up better than nearly any other market segment.
Reduce your monthly expenses.
Last but not least, it’s time to evaluate your budget and see where you can cut down on your monthly living expenses. In other words, you need to think about where you can cut back on spending. For example, could you start to limit how often you eat out or how many days you stop at your local coffee shop before work? Alternatively, are you subscribed to news sources or streaming services you’re not using that charge a monthly fee? Prioritizing channels like Dabl that are always free on TV and streaming could put some money back in your pocket!