Recessions are a natural part of our economic cycle, which means you can -- and should -- expect them to happen every once in a while. Back in December, FinanceBuzz conducted a survey to see how many Americans had a recession on their radar, and 53% said they were worried about one happening soon. But given the impact COVID-19 has already had on our economy, the FinanceBuzz team thought they'd give that question another try mid-crisis, and not shockingly, it found that 72% of U.S. adults now fear a recession in the very near future.
Further to this, 33% of Americans are now worried about losing their jobs. And around 14% are concerned about stock market declines -- something that's already happened rapidly over the past few weeks.
If you're stressed about a recession, there are a few steps you can take to prepare for that possibility -- and buy yourself some much-needed peace of mind.
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1. Secure your emergency fund
If you lose your job during a recession, your emergency fund could be the one thing that allows you to keep up with your bills during that time. Ideally, you should have about six months of essential living expenses in cash before a recession, because if you're laid off at work, it could easily take that long to find a job that matches your former earnings.
If you don't have an emergency fund right now, or you have some savings but not enough, start trimming needless expenses immediately so you're able to put some money into the bank. Of course, this assumes you've managed to retain your paycheck thus far. Many companies are, thankfully, letting employees work from home, and many are also cutting some slack to working parents who are forced to pivot between job responsibilities and child care while schools are closed.
If your earnings are holding steady during the current crisis, take a look at the things you're spending on and aim to cut back. That could mean canceling your upcoming summer vacation (who knows if it'll be safe to travel by then anyway?) and putting your refundable deposit into savings. It could also mean skipping the takeout meals you've been buying three times a week and sticking to cheaper grocery staples instead.
2. Start boosting your job skills
Job losses are common when recessions strike, and in some cases, they're unavoidable. But one thing you can do to reduce your chances of getting laid off is boost your job skills now. Think about the things you need to get better at and spend some time on the weekends improving in those areas (it's not like you have anywhere to go right now, so you might as well put in the time). And also, think about the ways you might add more value to your team or company. If you become indispensable, you may manage to ride out a wave of layoffs should one strike at your place of work.
3. Have a backup plan for paying your bills
Maybe you're able to pay your bills today, but what happens if your income declines or disappears in the coming weeks or months? Now's a good time to start thinking about your options for delaying or deferring expenses. You might, for example, contact your mortgage loan servicer and ask what leeway it will give you should your job go away. You can also visit your utility company's website to see if there's information on customer relief available. Just having that information could give you peace of mind.
At the same time, see what options you have for borrowing money. If you have equity in your home, now could be a good time to apply for a home equity line of credit that you draw down as needed. It's a relatively affordable and flexible way to get access to money.
The idea of a recession is very scary, but the more you prepare, the less you'll have to worry about. Take the above steps to get ready for an extended downturn, all the while remembering that our economy, thankfully, has a strong history of recovering from them.
