Whether it’s a recession or not, protect your finances now. here’s how

This story is part Recession Assistance ServiceCNET’s coverage of how to make smart money moves in an uncertain economy.

What is happening

With the latest GDP report showing another consecutive quarterly decline in economic activity, the country is likely in a technical recession.

why is it important

Previous recessions have all seen widespread layoffs, higher borrowing costs and a tumultuous stock market.

What this means for you

Take the worry out of daily macro news and focus on what you can control. Take stock of your financial life, gather facts and take action to protect your savings.

Many economists still refuse to use the R-word, despite warning signs that the US economy is likely in dire straits. technical recession. In addition to new quarterly drop in GDPor gross domestic product, consumer confidence has fallen, the stock market is in bearish territory and inflation continues to risedespite four interest rate Federal Reserve hikes.

A rise in layoffs – another key indicator of a recession – is also being felt across the country as many companies, particularly in the tech sector, have announced layoffs These last months. And if you ask most people, they’ll tell you that it’s definitely gotten harder to make ends meet. At least a survey conducted in June reveals that a majority of Americans, 58%, think we are in a recession.

But others point to some key factors that point in the opposite direction — for example, low unemployment rates, rising expenses and a healthy banking sector.

We call it a recession or not seems to be a rather subjective question of interpretation.

At CNET Money, we’re committed to supporting your financial health with accurate, timely, and honest advice that takes into consideration the pressing financial issues of our time. That’s why we’re launching the Recession Help Desk, a destination where you’ll get the latest advice and the best steps to take to get through this uncertain time.

First, a brief look back at the US economy

Since the Great Depression, the United States has experienced a dozen economic downturns ranging from a few months to more than a year. In some ways there is still a recession on the horizon: Economies are cyclical, with ups and downs. We can’t predict what’s going to happen in advance, and sometimes we can’t even tell what’s happening while we’re at it. Morgan Housel, author of The psychology of moneyperhaps said it better when he tweeted in April“We’re definitely headed for a recession. The only thing that’s uncertain is when, where, how long, how deep and the policy response.”

Trying to understand the specifics of the recession is a guessing game. Anyone who tells you otherwise is probably trying to sell you something. The best we can do right now is to use history to set the context, be more proactive about money movements that we can control and resist the urge to panic. This includes looking at what happened in previous recessions and taking a closer look at our financial goals to see what levers to pull to stay on track.

Here are eight specific steps you can take to create more financial stability and resilience in a turbulent economy.

Read more: Bear Markets: Expert Stock Market Advice for Investors

1. Plan more, panic less

The silver lining of the current recession forecasts is that they are still only forecasts. It’s time to make a plan without the real pressures and challenges that come with being in the midst of an economic downturn. Over the next two months, revise your financial plan and map out worst-case scenarios when your adrenaline isn’t pumping.

A few questions to consider: If you were to lose your job later this year or in early 2023, what would your plan be? How can you fortify your finances now to deal with a layoff? (Keep reading for related tips.)

2. Increase your cash reserves

The key to weathering a recession relatively unscathed is having money in the bank. The high unemployment rate of 10% during the Great Recession of 2009 taught us that. On average, it took eight to nine months for those affected to land on their feet. Those lucky enough to have strong emergency accounts have been able to continue to pay housing costs and save time figuring out next steps with less stress.

Consider rearranging your budget to allocate more savings now to get closer to the recommended six to nine month reserve for rainy days. It might be a good idea to disconnect from recurring subscriptions, but a better strategy that won’t seem so privy might be to call the billers (from utility companies to cable to car insurance) and ask for discounts and promotions. Speak specifically with customer loyalty services to see what deals they can offer to prevent you from canceling your plans.

3. Look for a second source of income

Web searches for “side businesses” are always popular, but especially so now, as many seek to diversify sources of income as a potential recession approaches. Just as it helps diversify investments, diversify sources of income can reduce the income volatility that accompanies job loss. For inspiration on easy, low-rise side-flips you might be able to do from home, check out my story.

4. Resist impulsive investing

It’s hard not to be worried about your wallet after all the stock market red arrows this year. If you have more than 10 or 15 years left before retirement, history proves that it is better to stick to the ups and downs of the market. According to Fidelity, those who remained invested in target-date funds, which include mutual funds and ETFs typically tied to a retirement date, during the 2008-2009 financial crisis had higher account balances in 2011 than those who have reduced or stopped their contributions. “Those who panic and sell ‘low’ often regret it because trying to time the market can lead to losses that are very hard to recoup because stock prices can change quickly,” said Linda Davis Taylor, seasoned investment professional and author of The family business.

If you have not yet subscribed to automatic rebalancing, consult your portfolio manager or online broker. This feature can ensure that your instruments remain properly weighted and aligned with your risk tolerance and investment goals, even when the market swings.

5. Lock in interest rates now

As policy makers raise interest rates to lower inflation levels, interest rates will rise. This is potentially bad news for anyone with an adjustable rate loan. It is also a challenge for those carry a balance on a credit card.

While federal borrowers need not worry about their rates rising, those with private loans variable rate loans may want to consider consolidation or refinancing options through an existing lender or other banks, such as SoFi, who could consolidate debt into a single fixed rate loan. This will prevent your monthly payments from rising unpredictably when the Federal Reserve raises interest rates again this year, as expected.

6. Protect your credit score

Borrowers may find it harder to access credit during a recession as interest rates rise and banks enforce stricter lending rules. To benefit from the best conditions and loan rates, aim for a solid credit score in the 700s or so. You can usually check your credit score for free through your existing bank or lender, and you may also receive free weekly credit reports from each of the three major credit bureaus through the end of the year from AnnualCreditReport.com.

To improve your credit score, try repay high balancesReview and dispute any errors who may appear on your credit report or consider consolidating high-interest credit card debt into a low interest debt consolidation loan Where Introductory 0% APR Balance Transfer Card.

7. Rethink buying a home

Although house prices have cooled in some areas, it remains a competitive housing market with few houses to go around. Whether rising mortgage rates add more pressure on your ability to buy a home within your budget, consider renting a little longer. If you’re also worried about your job security in a potential recession, that’s even more of a reason to take a break. Leasing isn’t cheap right now, but it can give you more flexibility and mobility. Without the need to hoard cash for a down payment and closing costs, leasing can also keep you with more cash during a potentially tough economy.

8. Take care of your valuables

The advice that was born out of the period of skyrocketing inflation of the late 1970s still applies today: “If it is not broke, do not fix it.”

With persistent supply chain issues, many of us face high prices and delays in acquiring new cars, tech products, furniture, home materials, and even contact lenses. This also includes spare parts. If a product comes with a free warranty, be sure to sign up. And while it’s a small fee to extend insurance, it may be worth it in a time of rising prices.

For example, my car sat in the repair shop for over three months, waiting for parts to arrive from overseas. So in addition to paying my monthly car payment, I have car rental costs that add up. If nothing else, I’ll be heading into a possible recession as a more cautious driver.

Read more: Small packages, same prices: shrinkage is sneaky

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