77% of Americans Think a Recession Will Hit This Year. Do These 4 Things to Prepare
- Recent data shows that many Americans think an economic downturn is imminent.
- A few key moves could spare you from a world of financial hurt if your job is cut.
It's important to accept that economic conditions could worsen.
For months, financial experts have been warning the public that the U.S. economy could soon take a turn for the worse. The Federal Reserve is trying to slow the pace of inflation by raising interest rates. But that could result in an extreme decline in consumer spending that leads to unfavorable economic conditions.
In a recent Primerica report, 77% of Americans think we'll end up in a recession at some point this year. And that's a pretty scary thought. But you can prepare for that possibility by doing the following.
1. Shore up your emergency savings
Do you have enough money in savings to pay for at least three full months of bills (and ideally, more like six months of bills)? If not, then your emergency fund might need a serious boost. That's the cash you're going to fall back on if you lose your job and need a way to supplement your unemployment benefits to keep up with your bills.
In fact, some financial experts say you should have a minimum of six months' worth of living expenses in the bank, and that eight to 12 months' worth is a more ideal target. So even if you're sitting on enough cash to pay your bills for half a year, you may still want to pad your savings even more.
2. Pay off variable interest debt
The last thing you need is debt with a variable interest rate (like a credit card balance) hanging over your head at a time when a recession may be imminent. That debt has the potential to get more expensive in time, and it could become even more problematic if you lose your job. Once you've boosted your emergency savings, make an effort to chip away at your variable interest debt to the greatest extent possible.
3. Pick up a side hustle
A side hustle could make it possible to boost your savings and pay off debt. But just as importantly, it can serve as a backup income source in case your job is cut during a recession. In fact, it's a good idea to get used to a side gig that's scalable, like driving for a ride-hailing service. That way, if you need to increase your hours, you'll have that option.
4. Avoid committing to new expenses
You may be thinking of joining a gym or taking advantage of a special promotion and signing a one-year cable contract. Don't do it. Now's really not the time to lock yourself into new expenses. If anything, you should be taking a closer look at your existing expenses and thinking about ways to start cutting your costs in case your income takes a hit.
We can't say with certainty that a recession will occur this year. But it's a possibility everyone should prepare for. If you take these steps, the idea of a recession may not be as daunting. And so it's worth making that effort not just for the financial protection, but also, for the peace of mind you stand to gain.
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