US Economists Predict A Recession This Year: 6 Proactive Steps to Secure Your Financial Future
There are constant debates about whether or not the United States is in a recession at the moment, and if not, will it be the case soon? According to a recent Wall Street Journal survey of economists at major banks, the US is heading for a recession within the next two years. In this survey, two-thirds of the economists at 23 major financial institutions that work directly with the Federal Reserve forecast a recession in 2023. Two more predict a downturn in 2024.
However, some Wall Street analysts and economists believe that even if the US does experience a recession this year, it will not be as severe as the 2019 pandemic or the financial crisis of 2008. Further, Fed Chair Jerome Powell asserts that he does not think anyone knows if there will be a recession. And if we do, it is simply unknown whether it will be a deep one or not.
However, recessions are designated post-factum, so consumers will not be aware of when the next one starts until after it is a fact. This suggests that getting ready for a recession may be a good idea.
Here are six proactive steps to take to secure your financial future in case of a recession or amid a crisis.
1. Take A Look At Your Monthly Budget
No matter how well or poorly the economy is doing, it is critical to have sufficient money saved up to cover your monthly expenses in case of an unforeseen emergency or a job loss. You can see how much money you are spending each month and on what by looking at your monthly budget, which makes it a great place to start.
However, before you plan on a budget, you should take a fresh look at your household expenses. You must be aware of the amount of income you can anticipate over the upcoming weeks or months and examine your bank accounts to determine whether you have any emergency funds. If you have a clear picture of the amount of cash coming in, you can set a budget that will help you live within your means.
2. Reduce Spending on Necessities
While you need to prioritize what is necessary and understand your four-wall essentials: food, utilities, rent/mortgage, and transportation, it does not mean that we cannot make a few cuts here and there.
- You can save money on your groceries by planning your meals and avoiding exotic ingredients. You could look at preparing cheaper meals by using ingredients such as canned soups and frozen veggies. If you are buying organic then you may temporarily need to change to the cheapest brand so that you can save some money. Tip: Always shop with a list and check out your pantry for those long-forgotten items.
- Cut your utility bills by reducing usage in practical ways.
- Save on natural gas and reduce transportation expenses.
- Look out for prescription discount cards to lower the cost of your medications.
You need to scrutinize all your essential expenses and identify how you can cut down on your spending.
3. Start Saving For Emergencies.
Starting to accumulate an emergency fund is essential in getting ready for a recession. Finding out how much you need to save is the first step. The rule of thumb is to have three to six months’ worth of expenses in savings.
Once you know the amount you must save, the next step is to begin monthly savings. Do not worry if you cannot save much money all at once. Over time, even $50 a month can add up to a lot. The important thing is to start and maintain consistency.
Further, if you do not have a sizeable emergency fund, you could postpone an expensive renovation project that is not necessary or cancel a planned vacation.
Building an emergency fund may be challenging, but it will be worthwhile in the long run. Having this safety net will ease your mind and help you overcome any financial difficulties that may arise.
4. Prioritize Paying Down High-Interest Rate Debt
Paying down any credit cards and high-interest debt should be everyone’s top priority while money is flowing in and the economy is still generally favorable. It will not just help you be more ready in case you lose your job, but rates are also likely to increase due to Federal Reserve rate hikes.
There are two ways to pay off the debt: applying for a balance transfer credit card or taking out a personal loan with a low-interest rate. You can eliminate debt much faster if you move high-interest debt to a credit card with a 0% APR.
You could also, contact your current credit issuer and ask for an interest rate reduction if you are not qualified for a credit card with 0% interest. According to Schulz, “Roughly seventy percent of people who requested one the previous year received one. Although not enough people ask.”
5. Expand Your Professional Network or Get A Side Gig
The Bureau of Labor Statistics reports that employment in the government, health care, hospitality, and leisure sectors increased towards the end of 2022. There was a 3.7 percent unemployment rate. However, there is a chance that it might get worse as there have been significant layoffs recently in the tech and media sectors.
So, if you are laid off during a recession or require additional income, expanding your professional network will send you advertisements, recommend you for assignments, jobs, or interviews, and will generally be your ally. You can also diversify your income streams by looking for side jobs or planning a business you want to start now to generate passive income in the future.
6. Update Your Résumé
The labor market has been favorable for job seekers, but as mentioned above the tech and media sectors are already beginning to experience layoffs and cost-cutting measures. It could be detrimental to other industries. Therefore, it is a good idea to update your resume now so you will be ready.
Your resume must be current and well-written. Also, make sure you have a Plan B for employment if you do not have a secure job. “Additionally, if you have thought about returning to school to earn a graduate degree, or advance your professional credentials, this could be the ideal time to do so”, according to CFP Diahann Lassus, Managing Principal at Peapack Private Wealth Management in New Providence, New Jersey. She further added that regardless of the type of economy, it will increase your chances of finding employment in the future.
Although the prospect of a recession can be petrifying, it is a usual economic happening. In this century alone, the world faced three recessions in 2001, 2009, and 2020. The best way to defend yourself and keep ahead of the pack is to train yourself to recognize the warning signs and to be well-prepared.