Experts Warn a Recession Is Coming, Here Are Four Ways You Can Prepare Now

Financial experts are now advising individuals to begin preparing for what looks to be a recession on the horizon. Here are four things you can do to help your bank account weather the coming storm.

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Karee

As inflation rises, you may be feeling the increased costs of goods and services and wondering if your paycheck can keep up. According to the Bureau of Labor and Statistics, the cost of food increased 10.4 percent for the year ending June 2022. To put into perspective how significant that is, it’s the largest increase in America since February 1981.

Gen Z has never seen an increase like this, and many aren’t prepared.

To fuel the fire even more, the USBLS also states gas prices increased 59.9 percent in that same time period. That’s the largest 12-month increase since Jimmy Carter was president in March of 1980. Electricity prices rose 13.7 percent, and natural gas saw an increase of more than 38 percent. Neither has seen increases like that since 2006 and 2005, respectively.

That’s the bad news. The good news? There are things you can do to protect yourself from going under as prices continue to rise. Financial experts are now advising individuals to begin preparing for what looks to be a recession on the horizon. Here are four things you can do to help your bank account weather the coming storm.

Create a Budget and Learn to Live With It

As painful as it may be, creating a realistic monthly budget can be your ticket to freedom. Knowing how much money you have to work with each month will keep you from overspending and racking up additional debt or tapping into your savings. Look for unnecessary expenses such as long-forgotten subscriptions you can cancel and cut back on things like eating out or online impulse shopping.

Work Now to Pay Off Debt

In an effort to slow down a possible recession, the Federal Reserve has already begun raising interest rates. How does that affect you? If you owe any consumer debt, such as a balance on a credit card, your interest rate could also increase, costing you even more until you pay off your debt. Prioritizing debt payoff now will save you money later on.

Build Up Your Savings Account

Creating a budget to keep from overspending is the first step to protecting your bank account during a recession. Paying off debt will save you money, but actively working to build up your savings account is equally important. As you work on your budget, add a line item to pay yourself as much as you can to work on building up your savings account.

While the general rule of savings is to have three to six months’ worth of your living expenses saved, during times of recession when the risk of job layoff increases, it’s a good idea to save even more if you can. This will help cover things like food, rent, utilities, and monthly payments in the event you lose your jog. Using online tools can also help you calculate how much you’ll need to save to cover all your expenses.

Your savings account can also help cover unexpected one-time expenses like car repairs or medical bills. The more you can save, the less you’ll need to put on a credit card if the worst happens.

Hold Off on Buying a New Home or Car

Unless it absolutely can’t be helped, now is not the time to buy a new home or automobile. As of October, the Federal Reserve has already raised the federal funds rate five times in 2022 and suggests it will do so again before the end of the year.

While interest rates dropped below 3 percent as recently as last year, at the time of writing, the average 30-year fixed-refinance rate is close to seven percent. With rates on the rise, you’ll save yourself tens of thousands of dollars by holding off buying a new home until post-recession rates begin to cool off.

Help Is There if You Need It

Even the best of plans can go awry, so if you’ve done all the above and find yourself short on cash, you may want to look for a short-term financial solution. There are lenders available to help you bridge the gap between what you have and what you need. Educate yourself and don’t be afraid to use them if needed.

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