- Experts fear a recession could strike at some point in the new year.
- It's important to shore up your finances ahead of that scenario.
Make sure to check them all off your list.
Will a recession hit in 2023? That's the big question on a lot of people's minds.
We can't say with certainty that a recession will strike, but we also can't rule one out. So where does that leave us? It's simple -- we should hope for the best but prepare for the worst. And here are three essential moves to make.
1. Boost your emergency cash reserves
Before the pandemic, you'd often hear that you were in pretty good shape if you had an emergency fund with enough money to cover three months of bills, and in even better shape if your savings could support six months of expenses. But in the wake of the pandemic, many experts have changed their tune on emergency savings. And now, they're calling for more like eight months' to a year's worth of bills in the bank.
If your emergency fund could use some work, spend the next couple of months pumping more money into your savings. You can do that by trimming expenses you can live without, like the streaming services you like having access to but don't really watch that often.
2. Try to pay off outstanding debt
Debt payments can be a hassle even when you're doing fine financially. But if a recession hits next year, you could wind up out of a job. And in that case, the last thing you'll want is to have to make a minimum credit card payment when you're barely able to cover things like food and rent.
That's why now's a good time to chip away at your credit card debt. If you manage to whittle that balance down or get rid of it, you'll have one less expense to grapple with at a time when economic conditions may have soured and your income may be affected.
3. Secure a side hustle
You may not have a lot of time for a second job, or the desire to hold one down. But taking on a side gig over the next couple of months could really help you prepare for a recession.
We just talked about boosting savings and paying down debt. There's probably a limited amount of cutting back you can do on the spending front, so if you want to make real progress toward boosting your cash reserves and getting out of debt, a second job could be your ticket to it.
Plus, side hustles may become harder to get in 2023. Companies and individuals alike could start curbing their own spending, making it harder for you to find work on the side. But if you line up a gig now and prove your value, those you work for may have a harder time cutting ties, even if economic conditions tempt them to.
Finally, your side hustle could serve as a backup income source if your hours at your main job are cut next year, or if your main job goes away completely. And if you want the option to carry your side gig into 2023, aim for something that's high in demand year-round.
Many retailers, for example, hire seasonal help for the holidays, but that sort of gig might disappear come January -- recession or not. A gig updating business websites, on the other hand, might have staying power.
We don't know if a recession will hit in 2023. But if you take these steps to prepare for one, you won't have to stress the idea of a downturn as much.
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