How To Prepare For A Recession

It’s a word everyone has heard recently… recession. A recession is when there is a general downturn, signaling a decline in economic activity. Oftentimes, that means unemployment is on the rise, while production of consumer goods is slower. This results in high interest rates, less consumer demand, and high inflation. All wrapped up that equals the dollars in your wallet not stretching as far as they used to. Many experts have predicted a looming recession sometime during 2023.

Before you stress and panic, take a deep breath. We’ve got tips and tricks to help prepare you, your family, and your wallet for any recession.

Assess your budget

While evaluating your monthly budget has been echoed in many blogs at this point, it’s imperative in a recession. During a recession, inflation will probably be rampant, causing your everyday goods and services to go up in cost. You will start to see the effects at the grocery store and at the pump.

To alleviate the stress on your wallet, look for spots to cut back on your budget. This includes unnecessary subscriptions, unneeded clothing, cutting back on brand-named items, and other “frivolous” expenses that you can do without that month. Everywhere you can cut means more money in your pocket.

Build your emergency fund

If you don’t have an emergency fund, now is a great time to start one. Even without the threat of a looming recession, emergency funds are for exactly what it sounds like… emergencies. An emergency can constitute a loss of a job, something breaking in your home, an accident, or anything that requires an unpredictable expense.

A recession may bring lots of unpredictable expenses. It’s a time of layoffs and rising costs. If you have an emergency fund built, you’ll be prepared for the unexpected.

Pay off debt, not accumulate it

Unless it is absolutely necessary, refrain from opening up new credit cards, loans, mortgages, or anything that puts you in more debt. Recessions often bring about high interest rates on these products and services, so choosing to be as debtless as possible in a recession will save you money in the long run.

Instead, focus on paying off any lingering debt you currently have during a recession. Especially high interest debt.

Don’t slack on retirement contributions

Funds may get tight during a recession, but don’t let that affect your retirement. Whatever funds you’re contributing now, keep it up. If you reduce your contributions now, you may not be able to hit your goal retirement age. Or worse, you’ll retire and not have enough funds.

Update your resume

A recession is a great time to build up your resume skills. Consider taking online classes and filling in skill gaps in your current career. If you show your employer that you’re too valuable to lose, then they will fight harder to keep you, even during the tough times.

If you do get laid off, then you already have an updated resume with new skills to pursue another career. Or, if your current income is shrinking due to inflation, contemplate picking up a side gig with the skills you have. Work the job(s) that will make ends meet until the economy calms down and rights itself.

The biggest way to combat a recession is to remain calm. If you recognize the signs early, err on the side of caution and start preparing. Panicking and stressing out will only lead to poor financial decisions, making the recession harder. Don’t give yourself the extra challenge. Prepare today.