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Inflation Personal Finance Recession - Preparing Your Finances For A Recession

Many Americans worry about inflation and personal finance recession because of the cost of groceries, gas, rent, and debts, as well as inflation and painful price hikes.

People are worried that a recession could happen in the near future, so it's important for them to get their lives in order.

Here's what you can do to get ready for a recession, whether it's coming soon or not for a while.

Update Your Resume

The job market has been very good for people looking for work, but that will change if there is a recession.

"People need to be ready for less job security in general," Deer said.

"Employment is at an all-time high, so it makes sense that it will go down."

So it's smart to update your resume now so you're ready if there are layoffs.

Also, if you've thought about going back to school to get a higher degree or improve your work skills, now might be the time to do it.

CFP Diahann Lassus, who runs Peapack Private Wealth Management in New Providence, New Jersey, said this.

It improves your chances of getting a job in the future, no matter what kind of economy there is," she said. The job market has been very good for people looking for work, but that will change if there is a recession. People need to be ready for less job security in general," Deer said. Employment is at an all-time high, so it makes sense that it will go down.

So it's smart to update your resume now so you're ready if there are layoffs.

Also, if you've thought about going back to school to get a higher degree or improve your work skills, now might be the time to do it.

CFP Diahann Lassus, who runs Peapack Private Wealth Management in New Providence, New Jersey, said this.

It improves your chances of getting a job in the future, no matter what kind of economy there is," she said.

Reduce Expenses

Lassus said that you should start to think about where you can cut back on spending.

She said to think about where you want your budget to be in both the worst and best case scenarios.

Lassus said,

You have to think about the "what ifs". What if I get less money? What if my car stops running? What if the rent goes up? Start looking at all the fun things you spend money on and see if you can find ways to cut back, she said.

Bulk Up Your Emergency Fund

Emergency fund piggy bank ad bills held by hand
Emergency fund piggy bank ad bills held by hand

Most financial advisors say that you should have enough savings to cover your living costs for three to six months.

Depending on your situation, you might want to think about that again.

For example, Lassus said, it might make sense to have more than six months if you think you might have a problem with your job in the future.

But it's important not to get too stressed out by the thought of reaching that goal.

Pay Down Debt

Pay off debts written and a pen
Pay off debts written and a pen

Deer says that if you have high-interest debt, you should start working on paying it off.

Not only will it help you be ready if you lose your job, but rates are expected to go up because the Federal Reserve is raising rates.

CreditCards.com says that the Fed's most recent increase caused the national average credit card rate to go above 17% for the first time in more than two years.

The central bank thinks that rates will keep going up for the rest of the year.

Stay Invested

Two shaking hands
Two shaking hands

You may be thinking about cutting back on your 401(k) or getting out of the market because of recent changes in the market.

But it's important to control your feelings and remember that you're in it for the long haul.

Lassus said,

You should never make an investment decision when you are in a panic or when you are really afraid. You should try to take a step back from that if you want to make good decisions.

Deer pointed out that the past shows that bull markets last longer than bear markets.

Income And Personal Finance Do's And Don'ts

Wendy De La Rosa is an assistant marketing professor at the University of Pennsylvania's Wharton School, which has one of the best business programs in the world. She also works to help people with low to moderate incomes with their money.

She helped start the Common Cents Lab, which uses both psychology and economics to help people with their money.

De La Rosa says that people can't budget or save if they don't make enough money, which gets harder as the prices of everyday things go up.

She says that people who want to get ahead should do things to make more money, like asking for a raise.

With costs of living rising, I think it's an appropriate conversation to have, De La Rosa said. In this tight labor market, where employers are essentially falling over themselves to try to find talent, if you feel like you're being undervalued at your workplace, now is probably the time to start searching for another role," she said. "Now is the time to polish off your resume, to get out there, see what you can get. And at the very least, ask for a raise at your company.

Credit card debt is the next problem to deal with.

According to Nerd Wallet, as the federal interest rate goes up, so does the interest on your credit cards, which has been around 15% for the past few years.

But interest rates can be as high as 25% to 30%.

De La Rosa said that a person's rate is often set when they are young and have little or no credit, which means that their rate will be higher.

Even though making payments on time improves a person's credit score over time, most credit card companies don't change the interest rate unless you ask them to.

De La Rosa said tip No. 1 is,

Call your credit card company and ask them to lower your interest rate. Go ahead and pick up the phone. Many, many years ago, I did a small pilot where I brought people into the lab and had them kind of call your credit card company. About 40% of them were able to get either a credit card with a 0% APR promotion or a credit card with any interest rate they wanted "rate decrease."

De La Rosa said that it's important to remember that most credit card companies collect interest on late payments every day, not just once a month, which is something that many people may not know.

This is why you must get that balance back to 0 as soon as possible.

Don't wait until the end of the month to make a big payment on a lot of credit card debt.

Instead, try to make payments every week or as often as you can so you don't pay more than you have to.

Still, De La Rosa isn't telling people to pay off their debts with every dollar they have.

People should have some cash saved up for times when they need it.

If you're close to the middle-income threshold, where the average family makes about $60,000 a year, you might want to think about having two to three months of emergency savings, she said. But all of that depends on how much money you have and where you are on the income scale.

At the same time, De La Rosa said that the best way to get a big raise in pay is to get a job with a competitor.

People Also Ask

During a recession, when demand and economic activity are down, the rate of inflation tends to go down.

During big recessions like the ones in 1929–1932, 1981, 1991, and 2020, the inflation rate went down.

Is Recession An Inflation Or Deflation?

What Does Deflation Mean in an Economy?

When prices of goods and services drop across the whole economy, this is called deflation. This makes it easier for people to buy things.

It is the opposite of inflation and can be bad for a country because it can mean that the economy is getting worse, which can lead to a recession or depression.

Who Benefits In A Recession?

During a recession, renting is likely to become a more attractive option, if not the only one. This is good for rental agents, landlords, and property management companies, who can make a lot of money from it.

Conclusion

During a recession, unemployment rises.

More people are unemployed, making it harder to find a new job.

Those who keep their jobs may see pay and benefit cuts and have trouble negotiating raises.

In a recession, stocks, bonds, real estate, and other investments can lose money, reducing savings and upsetting retirement plans.

If you lose your job and can't pay your bills, you may lose your home and other property.

During a recession, businesses make fewer sales and may fail.

The government tries to help businesses during tough times, like during the coronavirus crisis, but it's hard to keep everyone afloat.

During a recession, lenders tighten standards for mortgages, car loans, and other financing.

You need a higher credit score or down payment to get a loan than in normal times.

Even if you prepare for a recession, it's scary.

Recessions don't last forever.

Even the Great Depression ended, and it was followed by U.S. history's strongest economic growth.

About The Authors

Luqman Jackson

Luqman Jackson - Luqman Jackson is an entrepreneur, blogger and traveler. He teaches copywriting, creative discipline, and ethical marketing. For business owners who want to learn the basics of persuasive writing, she has a weekly column, a podcast, and a copywriting course.

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