Many Americans are worried about their financial security due to high inflation and rising gas prices.
Sagewell Financial CEO Sam Zimmerman said, “If you have both inflation and a recession combined, it’s a whole other beast.” Sagewell Financial is a bank company that focuses on seniors. This is the time to act. You have more control over reducing the effects of recession if you act quickly.
Recent statements by President Biden and U.S. Treasury Secret Janet Yellen sought to alleviate economic concerns.
Sunday’s ABC This Week featured Yellen saying that she expects the economy to slow. It’s been growing at an extremely rapid pace as the economy. As the labor market has rebounded and we have reached full-employment, it’s only natural that we now expect a transition towards steady and stable growth. However, I do not believe a recession is possible.
It’s never too early to start planning ahead, especially with the grim forecast. Continue reading to find out how you can prepare yourself for a recession.
There are money moves that you can make to help with a downturn but they shouldn’t include bailing the stock market out.
Jordan Rippy, an accounting professor at Johns Hopkins Carey Business School and personal finance expert, said that “the worst thing people could do is get nervous and pull out money from the market.” “Most people should invest in the market over the long-term.”
Instead, you should look at ways to reduce your monthly budget. This can include cutting subscriptions and streaming services and negotiating discounts on other bills, such as cable and cell phone.
Zimmerman stated that bill-negotiation is an option to lower your costs and it’s a simple way of combating inflation.
To reduce recurring expenses and organize your spending, create a spreadsheet or use Mint budgeting software.
Lisa Featherngill (national director of wealth planning, Comerica Bank) stated that if someone spends all they bring home, it shows how much they have spent.
Inflationary conditions can make it expensive to have debt. You want to get rid of credit card debt and any other type of variable rate debt as soon as possible. This is because these interest rates will increase and cause more debt.
Rippy stated that if you have a credit card balance past the due date, you will be paying interest at 15%-25%. This is very costly debt. Credit card debt is not beneficial. It is a drain on your personal finances.
Greg McBride chief financial analyst at Bankrate.com said, “You don’t want to be carrying debt into a higher rate environment or into an economic environment with more economic uncertainty.” While you may work less or have less money, the reality is that debt payments can still be made if the economy crashes. If you are in tighter times, getting rid of any debt now will help you be more financially secure.
Fixed interest rates loans, such as student debt and mortgages, are generally less burdensome.
“Fixed rate debt is anchored against inflation when it was low but your other expenses were higher. Zimmerman stated that it is a good deal to reduce your debt in this situation. In a simple example, you could get a 2% fixed mortgage and inflation at 7% to 9. Your debt will remain the same even though things become more expensive.
Don’t put off saving for retirement. Keep saving the same percentage of your income as you earn in your 401(k), or other retirement savings plans. If you don’t attempt to time the market, your assets will grow over the years even if they are volatile.
This is known as dollar cost averaging. It allows people to see past the dizzying swings of the stock market and continue building their nest egg.
Rippy stated that personal finance is not a science. It is a long-term game and people should continue to put their money in their retirement accounts. Continue to put money in there, and it will grow.”
According to Zimmerman, you can invest in more resilient sectors by investing in gold and commodities such as alcohol.
He said that people drink more when they are happy than when they are sad. Therefore, alcohol is an industry that has the potential to be recession-proof.
Contrary, cryptocurrency is a highly speculative asset.
Diversify your income sources to ensure that even if your company shrinks or you lose your job you still have money coming in.
This is the right time to start a part-time or hobby job. Zimmerman stated that having multiple income streams is extremely valuable when there is uncertainty.
You can sell handmade goods on Etsy if you are creative. You can also sell your unwanted clothing and household items on Ebay or online consignment shops like Thredup.
Zimmerman stated that you are simply taking assets that are depreciating in worth to make a quick buck and clean up your house. Many people have lots of stuff, and you can almost always sell things that are valuable.
