My Income Might Decline in 2023. Here's Why I'm Okay With That

It's not an ideal situation, but it's one I'm set up to handle.

Will a recession hit in 2023? There's reason to believe it might.

The Federal Reserve has been moving forward with aggressive interest rate hikes in an effort to slow the pace of inflation. If rising rates make borrowing too expensive, consumers are likely to cut back on spending, thereby bridging the supply-demand gap that's caused inflation to soar. But if they cut back on spending too much, it could be enough to spur a recession and lead to higher levels of unemployment.

As a freelance writer, I'm well aware that the volume of my work could decline in 2023 if clients aren't willing to spend as much for my services. And if my volume goes down, so does my income.

Of course, that's not an ideal situation -- far from it. But it's also not one I'm panicking over. Here's why. 

I have lots of emergency savings

In the wake of the pandemic, some financial experts have urged consumers to boost their emergency funds. The old convention was to have enough money in savings to cover three to six months of living expenses. The new convention seems to be eight to 12 months. 

Because I've always prioritized savings, I have enough cash in the bank to cover a full year's worth of bills. As such, I know I have reserves I can tap should the need arise due to a drop in income.

My earnings aren't what we use to pay for essentials

When my husband and I set up our budget back in the day, we knew we needed some wiggle room to account for a decline in my income, whether due to a lack of work or childcare constraints. As such, we've taken on essential expenses we can manage on his income alone. 

Take housing, for example. We can cover our mortgage, property taxes, and related costs based on my husband's paycheck. His paycheck is also enough for us to buy groceries, pay for utilities, and cover our transportation-related expenses, like auto insurance and gas. 

It's not as if my money does nothing for our household. We use my income for things like discretionary spending, so if my earnings take a big hit, it could mean no vacations for us in 2023, and my kids might have to give up some of their activities. We might also, if things get really bad, have to rethink things like paying for different streaming services. And we'll definitely have to grocery shop on more of a budget. But as long as my husband's income holds steady, we can pay our essential bills, and that gives me peace of mind.

It pays to prepare

I've come to terms with the fact that my income might decline in 2023. If you're self-employed or work in an industry that tends to be vulnerable during recessions, then it pays to brace for a potential hit, too. That could mean shoring up your emergency fund and boosting it while you can, and also, making a list of the extra expenses you can dump in case your earnings shrink -- things like cable and subscription boxes.

You might even start thinking about ways you can reduce some of your essential expenses. If you own a home, you don't necessarily have to rush to list it and move to a cheaper one. But if you're coming to the end of an apartment lease and can move without spending a lot (say, you have a friend with a truck), you may want to consider getting a lower-cost apartment if you're worried your income will decline.

We don't know what 2023 has in store for us. But if you're concerned about your ability to maintain a solid income during a recession, then it's best to ramp up on the savings front and make changes to your spending to a reasonable extent.