There is no short answer here. Folks have been discussing a looming recession for at least the last year (probably even before).
Here are some recent takes:
There you have it... literally, no one knows.
Not sure whether to laugh or cry? You're not alone.
Some people consider the US's GDP (Gross Domestic Product) as the main indication. Other people look at the markets. Others look at unemployment rates. In reality, no ONE number can give us the answers. We have to look at what's happening holistically. AND two mainstream things have people in a panic at the moment: the cost of eggs (well, the grocery bill in general) and all the tech layoffs we've seen.
The point of this post is not to say whether we are or aren't in one, but what we can be doing financially to safeguard ourselves no matter where the nation is in the economic cycle.
Your Emergency Fund
Emergency Fund= your financial safety net if life goes awry.
Have you figured out how much you need in this account? If not, here's how I like to put it together. Take a look at your current spending plan (if you don't have one of those, here's a former post talking about budgets) and analyze your expenses. What costs remain if you hit a rough patch, and which ones can you cut out?
Here are a few examples of my expenses that will stay:
RV Loan (unless we opt to sell the RV in a pinch)
Truck Loan
Internet
Insurance
Here are a few examples of my expenses that would be cut:
All TV streaming services except one
Hair cuts/colors will be less frequent
Massages
Some charitable giving
Once that emergency budget is established, times the total by 3, 4, 5, 6, or beyond (number of months), depending on what type of landing pad you feel most comfortable with. Some clients feel great with a three-month padding; others want an entire year. You have to ask yourself what brings you the most peace of mind. If you're still determining what would make you feel comfy, here's a rule of thumb: If you work in a stable industry and have a transferable skill set, start with three months. If you work in an uncertain sector or have a niche skill set, go with six months+.
HOT TIP:
The best place to house an emergency fund is in a High Yield Savings Account. You get the most interest in this type of account.
Both BankRate.com and Nerdwallet.com always have their best HYSA recommendations at the ready.
Increasing Your Income
When was the last time you raised your rates? Did you know that $50 in 2020 is currently equivalent to $57.24? This calculator is one I often use to figure out the current worth of a specific dollar amount.
The cost of everything around us is rising, and the only way to hold on to your buying power is to raise your rates to keep up; otherwise, you're taking a demotion.
If raising your rates isn't an option, is taking on an extra job every few weeks an option? That alone can add a few hundred bucks to your pocket.
Investing
Most people agree that stocks have been "on-sale" for a while. If you have extra funds to stick in the market, now may be a good time to do it. And, if you're not up for the market, US Bonds still have a fairly decent return with less risk attached.
[NOTE: this is not investment advice, just an opinion based on financial articles I've read -- investing with a professional's advice is recommended if you're not sure what your next step is]
Debt Reduction
Reducing how much money comes out of your monthly budget toward debt can help with cash flow. If you've been slowly paying things down, now may be an excellent time to pick that up, especially if it's high-interest debt. Have you tried the Avalanche, Snowball, or Landslide methods? Those are some of the quickest debt reduction options available! This blog post, Say Goodbye: The Ultimate Guide to Conquering the Debt You Don't Want walks through each of those debt reduction methods.
HOT TIP: One of my favorite tools to determine a debt payoff timeline is PowerPay, developed by the Utah State University Extension.
Networking
There is no wrong time to network. You can express what you're looking for when you get to know people in your industry. Are you looking for more work? Are you curious about a different industry? Plus, this helps put what you're looking for into the universe. Bonus! Because the universe is always listening.
Currently, there is no agreement as to whether or not we're heading into a recession or if we've avoided one by the skin of our teeth. Only time will tell. Here's to doing what's best for you and your financial situation!
Here's to you!
Melissa Mittelstaedt
Money Coach | Accredited Financial Counselor®