A Recession Could Be Coming. Here's How Dave Ramsey Suggests You Prepare
- There are worrying indicators that a recession is coming.
- Your finances could be damaged in a recession.
- Finance expert Dave Ramsey has some tips on how to prepare, including paying down debt.
Could this advice protect your finances if a downturn happens?
Many financial experts are warning of an impending recession and there's reason to be concerned. With the Federal Reserve raising interest rates and projecting higher unemployment rates, along with continuing inflation and ongoing supply chain issues, there's a very real possibility to suspect an economic downturn is coming.
Unfortunately, your own finances could be adversely affected if the economy enters a recession. To make sure you're ready, you may want to read some tips on preparing from finance guru Dave Ramsey.
Here's how Dave Ramsey suggests preparing for a recession
Ramsey warns that if the country enters a recession, it's critical that "you have your own house in order and ready to stick it out during a recession." And he provides some specific suggestions for how to do that.
First and foremost, if you have debt, he recommends working on paying it off ASAP as long as you have a steady, secure job. However, if you are unemployed currently or if you fear that you could lose your job in the near future, he advises pausing any efforts at early debt payoff so you can prepare to cover the basics.
"You’ve got to prepare for a storm," the Ramsey Solutions blog reads. "Make sure you cover your Four Walls first -- that’s food, utilities, shelter and transportation -- and stockpile some cash. Stop paying any extra payments toward your debt, but do continue to make the minimum payments if your Four Walls are covered (so your debt doesn’t go into default). The most important thing is to take care of yourself and your family."
For those who are focused on savings already instead of debt payoff, Ramsey suggests staying the course. "Keep saving! Having an emergency fund is never a bad idea. Think of it this way: If a recession did happen, you could rest easy knowing you have your emergency fund in place." And he suggests really buckling down and tightening your budget so you aren't wasting money during difficult economic times.
Finally, for people investing, Ramsey warns you shouldn't sell your assets even if the market is going down or if you fear it will. "Ride it out. Stocks rise and fall all the time. And even if you’ve seen a loss in your investments, you’ll only feel that loss if you take the money out. So don’t pull your money out right now. Keep your investments where they are, and wait for the upswing to happen."
Is Ramsey right?
The steps that Ramsey suggests taking to prepare for a recession are good ones. Everyone has different financial objectives they are working on achieving, but when tough economic times are coming it's important to make sure your current priorities are the right ones. This can mean, for example, shifting from debt payoff to more savings as Ramsey recommends.
So whether you are currently trying to become debt-free, are working on building up your savings account, or are pouring your spare money into the stock market, following Ramsey's advice to help you get ready for an economic downturn is a good idea. With his tips, you can hopefully make it through any recession without ending up compromising your financial goals.
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