About a quarter of economists predict the U.S. economy will be in a recession by the end of 2020. But 40% of Americans aren't financially ready for a downturn if one were to occur in the next six to 12 months, according to a new Bankrate survey of 2,605 adults.
Three in 10 respondents (31%) said they have done nothing to prepare for a recession. Among respondents who are taking steps, 44% are actively spending less money, 33% are saving more for emergencies, and 31% are paying down credit card debt.
"Putting your head in the sand is not going to make the problem go away," says Greg McBride, chief financial analyst at Bankrate. "We can't control the economic environment, but we can take control of our finances." Here's how.
Getting your finances recession-ready is an exercise in "getting back to the basics," certified financial planner Shannah Compton Game, host of the Millennial Money podcast, told Grow earlier this year. Some of the key steps include building your cash reserves, getting your spending under control, and reviewing your investments.
If your budget is really tight, you can still find creative ways to boost your savings, says McBride: "Any unanticipated income, whether it's something big, like a bonus check, or something small, like a rebate, is money you can put into savings."
Read more: 4 ways to recession-proof your finances
Navigating a recession is tougher if you have debt payments to keep up with, like student loans, a mortgage, or credit card balances. Ahead of a downturn, it can help to focus on paying off high-interest debts and look into refinancing. You may also want to meet with a debt counselor if you're struggling to come up with a repayment plan.
Accelerating debt payments while the economy is still strong can also free up your borrowing capacity in case you're really in a pinch if times get tough, says McBride. "If the savings are running low, and you still need money to get groceries or put gas in the car to go to a job interview, you'll have the capacity [to use credit] for something that's truly necessary."
Job security is a big concern during a recession. Unemployment rises as companies lay off workers, and slow hiring can mean getting a new job proves challenging. Bolstering your credentials, adding to your skills, and networking can help position you to manage your career through a downturn.
"The biggest thing is staying up-to-date with technology, certifications, and skills that separate you from the pack," says McBride. "Not only is that better insulation from a potential layoff, but it makes you more marketable if you are looking for a job."
Read more: 4 ways to recession-proof your career
No matter the economic environment, boosting savings, paying down debt, and investing in your career can make you financially healthier in the long term, says McBride. What's more, shoring up your finances can ready you for an emergency, economic or otherwise.
"It's the same reason you have insurance on your house," says McBride. "You're not hoping [an emergency] happens, but you want to be prepared in the event that it does."
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