- "Recession talk can strike fear in the hearts of many, especially when it comes to your personal finances. Even though they are a normal part of the economic cycle, it doesn't mean you don't have any control to manage the impacts a recession may have on your money," writes Jannese Torres-Rodriguez.
- "I love a good side hustle. Personally, I'm against relying on a single income source to fund your life. One is too close to none, and especially in a recession, income instability is a real possibility. If you've always had a business idea, now is the time to try it out."
I was born in 1985, and as an elder millennial, my first steps into the working world coincided with the 2008 Recession. I graduated from college in May 2007 and entered the workforce six months before the US economy fell into a 18 month freefall. At the time, I'd never heard the word recession before, but I learned very quickly what it was, and how real the impact could be.
I was a new graduate with a new job, but instead of getting an apartment right out of college, I made the more cautious decision to move back in with my parents for two years. My family and I weathered the recession relatively unscathed, although watching our retirement accounts take a massive nosedive wasn't fun. But the impact of the recession was everywhere.
I saw friends lose jobs and struggle to find well-paying work. Gas prices spiked to over $4 a gallon. Foreclosures skyrocketed and many people lost their homes. Birth rates declined. It was a wild time, and many people, especially Millennials, are still feeling the impacts of the 2008 recession today. It was a harrowing time to say the least.
As a growing choir of financial analysts and economists pontificate about the likelihood of another recession, it's important to know that you can take steps right now to shore up your finances, and weather any storm that may be headed our way.
Here are seven steps you can take to manage the impact on your finances during a recession.
It's always a good time to comb through your bank and credit card statements and see what's going on with your money. Maybe you have a couple subscriptions which you meant to cancel but never got around to. Or perhaps you've been making extra trips to your local take-out restaurant instead of meal planning on the weekend. Here's your chance to trim any fat in your spending.
Have you been a long-time customer of a particular service provider? Now is a good time to shop around and see if you're still getting the best price for that service, or call to see if there is any room to negotiate the current price down.
A pre-paid cell phone service provider can shave thousands off your annual cell phone bill, and cutting cable in favor of lower cost streaming services are options to explore. Both strategies have worked well for me in the past.
While layoffs are possible in any economic climate, the chances of you experiencing one increase during a recession. When people slow down their spending, that reduction in income affects businesses, and one of those businesses could very well be your employer. So if you typically keep a three month emergency fund, I'd recommend doing what you can to boost it, even doubling it to six months, or more.
There are a number of ways you can do this, including diverting any of the money you're saving from trimming those non-essential expenses and looking for additional ways to earn income by side hustling, dabbling in the gig economy, or advocating for a raise at a 9-to-5.
Best case scenario, you don't lose your job, and you've just created an extra cushion that can grant you peace of mind, or can be used for a larger goal, like buying a home, when the economy is on the rise again.
Video by Mariam Abdallah
Interest rates went to zero during The Great Recession, in order to stimulate spending. We're seeing the opposite happen, where interest rates have jumped in just a few short months. When interest rates go up, borrowing money becomes more expensive. The biggest impact for most will be the price of variable interest rate debt, also known as credit card debt.
It's important to know that a larger chunk of your debt payment will go towards interest as the rates increase, so if you're able to ramp up your payoff plan, now would be a good time, in order to offset potentially more cost to you down the line.
If it's been a while since you've applied for a new job, and your resume hasn't been updated in the last 12 months, now is a good time for a resume refresh. Make sure to include your latest role and experience, expand your network via LinkedIn or other relevant industry or alumni groups.
Also, don't be afraid to get in touch with old colleagues who might have openings at their current workplaces, or who could just act as a sounding board and source of community.
I would also recommend keeping an eye out for layoffs in your field on message boards like TheLayoff.com and Layoffs.FYI. Layoffs can be incredibly destabilizing, even when you see them coming, but having some lead time can help you shore up your resources.
I love a good side hustle. Personally, I'm against relying on a single income source to fund your life. One is too close to none, and especially in a recession, income instability is a real possibility. If you've always had a business idea, now is the time to try it out.
Thanks to the internet, starting a low-cost online business is more accessible than ever. Start by looking at your existing professional and personal skills, and see if there's something in either of those lists that you'd love to do as a side business.
Video by Tala Hadavi
The volatility of the stock market can be scary, but it's important to not panic and think about the ways that you can use this moment to bolster your long-term goals through investing. If you are consistently investing for retirement, I would stay the course, even if you find that you need to contribute a little less each month.
In general, if you are concerned about buying at the wrong time, overall, I would not recommend trying to time the market. Instead, consider setting a monthly investing goal, regardless of what's happening in the market. Using this approach can help you get into the habit of investing on a regular basis, which is a key strategy to building long term wealth.
There's nothing worse than making a big purchase, like buying a home, for example, and losing your job right after. This happened to my husband right before we started home shopping in 2015. As a result, we delayed purchasing a home until a year later, when he finally found a new job. Not having to worry about a mortgage was a godsend, so if your job or industry is seeing a spike in layoffs, now might be the time to revisit any big spending plans you have.
However, with rising interest rates, if buying a home is your No. 1 priority, it may not pay to wait. This is why the old adage "personal finance is personal" is truer than ever.
Recession talk can strike fear in the hearts of many, especially when it comes to your personal finances. Even though they are a normal part of the economic cycle, it doesn't mean you don't have any control to manage the impacts a recession may have on your money. Use these seven steps to prepare for a recession and put yourself in a more secure position with some strategic planning.
Jannese Torres-Rodriguez is a nationally acclaimed Latina money expert, educator, speaker, writer, and business coach. She became an accidental entrepreneur after a job loss led her to create a successful Latin food blog, Delish D'Lites. Now, she helps her clients and listeners build successful online businesses that allow them to pursue financial independence and freedom. Jannese is on a mission to educate marginalized communities on topics like entrepreneurship, investing, and building generational wealth through her personal finance podcast, "Yo Quiero Dinero."
This content is for informational purposes only and is not intended as investment advice. The strategies and investments discussed may not be suitable for all investors. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions.
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