The idea of an economic recession can be scary. And unfortunately, it might soon be a lot of people's reality.
A recent survey by Northwestern Mutual found that 67% of U.S. adults expect the U.S. economy to enter recession territory in 2023. And while the idea of that isn't exactly comforting, the more steps you take to prepare for a downturn, the more peace of mind you'll give yourself. Here's how to gear up for a worsening economy.
1. Build or boost your emergency fund
The problem with recessions is that they tend to go hand in hand with higher levels of job loss. But you can prepare accordingly by boosting your emergency fund, or building one from scratch if your savings account is currently empty.
At a minimum, you'll want to aim for enough money in savings to cover three months of essential bills, like your rent or mortgage, car payments, food, and utilities. The logic is that if you were to lose your job, it might take a good three months to find a new one. So it's important to have a way to cover your basic expenses during that period.
2. Shed your high-interest debt
Because a recession could lead to job loss, it's a good idea to minimize the number of expenses you're on the hook for. If you have a credit card balance you've been carrying, now's a good time to try to rid yourself of it.
First of all, the longer you carry that balance, the more it's apt to cost you in interest. That's money you're paying your credit card company rather than sticking in the bank to boost your savings.
But also, let's say you currently have a $70 minimum credit card payment you have to fork over every month. If you're able to get rid of that obligation, you'll have one less expense to grapple with while unemployed (if you lose your job).
3. Put off a large purchase
You may be eager to buy nicer furniture or upgrade some of your electronics. But putting off large purchases is a good way to be recession-ready.
First of all, if you have to finance your larger purchase, that's an extra loan or credit card payment you're looking at taking on. And you don't want to be loading up on more debt at a time when your job might end up on the chopping block.
Even if you're able to pay for a big purchase outright, that's money you'll be removing from your savings when you might need the extra cushion. So if your large purchase isn't something you absolutely need right away, hold off.
4. Grow your professional network
When you're looking for work, who you know is often just as important as what you know. By growing your professional network, you'll potentially give yourself more people to reach out to for help should your job end up being pulled in a recession.
You can expand your network by researching local industry events — and making an effort to show up. And also, don't underestimate the power of LinkedIn connections.
5. Acquire more job skills
The more value you bring to the table at work, the more staying power you might have if a recession strikes and your company is forced to make cuts. Think about the knowledge gaps you have that are preventing you from doing the very best job possible. And then take steps to address them, whether by shadowing colleagues with more experience or taking an online class.
There's no doubt that the idea of an economic downturn is unsettling. But if you take these steps, the idea of a recession may not cause you to lose as much sleep.
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