- Another top banker predicts the U.S. will enter a recession in 2023.
- Jamie Dimon says we face serious issues that will lead to economic pain.
- Bolstering your emergency fund now could help you handle any financial crisis.
Jamie Dimon says we could be in for some serious economic trouble.
JPMorgan CEO Jamie Dimon has doubled down on his recent recession warnings. The billionaire businessman and banker told CNBC during a recent conference that he thought the U.S. would enter a recession in 2023.
Dimon said the U.S. and global economy face some major issues. These include spiraling inflation, rapid interest rate hikes, and Russia's invasion of Ukraine. "These are very, very serious things," Dimon said. He added he thinks these factors "are likely to push the U.S. and the world -- I mean, Europe is already in recession -- and they’re likely to put the U.S. in some kind of recession six to nine months from now."
Tough times ahead
Dimon is not alone in saying we're about to enter troubled economic waters. The Federal Reserve has taken aggressive steps to try to curb inflation, but the fear is that one of the main tools at his disposal is to raise interest rates. This is a very blunt tool with which to solve a delicate problem. Dramatic rate raises could trigger a recession -- and many CEOs, business leaders, and economists believe this is the scenario we're looking at now.
The U.S. has weathered a number of recessions in its history. There've been three since the turn of the century. Recessions are characterized by a significant decline in economic activity, and often come with job losses and stock market declines. Dimon predicted that the stock market, which has already seen dramatic drops, could fall another 20%.
No two recessions are the same, and it's hard to know what shape the next one will take, particularly in the aftermath of what was an unprecedented global pandemic. One thing we do know is that no recession lasts forever. Recessions can be tough, but they're part of economic cycles, and they do pass.
How to recession-proof your finances
One of the biggest temptations when storm clouds are gathering is to ignore the problem. It's totally understandable, but there may be steps you can take today to ease the pressure if we do hit economic trouble. Here are a few of them.
1. Take a look at your finances
If you don't know how much you spend vs. how much you earn, now is a good time to sit down and make a budget. Budgeting can be intimidating the first time you do it. If you don't want to use a spreadsheet, see if a budgeting app can help. Try to see your budget as something that will help you manage your money rather than something to be scared of.
Work out how much you spend on essentials each month, and where you might be able to cut back if necessary. The cost of living has crept up so much in the last year that you may be spending more than you realize. If you're spending more than you're making, consider ways to either cut your spending or earn more money. Right now, the job market is still strong, which means you may be able to pick up a side hustle and bring in some extra cash.
2. Build up your emergency fund
Having three to six month's worth of money set aside in a savings account could help you face a range of financial crises -- including job loss. In a worst case scenario, a recession might cause employers to lay off people. An emergency fund can tide you over while you look for a new job or even move into a new career. If you can't put together three month's worth of expenses, put aside as much as you can.
3. Pay down high interest debt
Carrying credit card debt can be a vicious cycle. You take on debt because you can't cover your costs, and that debt then costs you even more money. Unfortunately, if you lose your job that debt will weigh even heavier on your finances, especially as rising interest rates make it more expensive.
Depending on your financial situation, it may not be feasible to become debt free before next year. But if you can figure out a plan to pay off your debt, including how much you can pay off each month, that will be a big step in the right direction.
4. Dust off your resume
In addition to strengthening your financial foundations, the stronger you can make your career base, the better. Update your resume and think about what you might do if you do get laid off. Now might also be a good time to catch up with old colleagues or reconnect with your professional network. If you've been thinking about changing jobs, work out what skills you might need and how you might go about applying. If you want to stay in your current job, look for ways to show how valuable you are and see if there are any courses you can take to improve your skills.
We may well see a recession in 2023, but if you can shore up your career and financial situation, you'll be well placed to handle it. You might not be able to position yourself perfectly, but even making a plan and putting some cash aside will lessen the pain.
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