According to many financial experts, the United States is due for another recession.1 In fact, we have been due for a recession for around four years, but thankfully it has not happened yet. However, another recession will happen one day, and it could be very soon. So, what are some ways you can plan for one?
Build an Emergency Fund
No matter what the state of the economy is, it is always a great idea to save a portion of your paycheck. Whether this be with the purpose of planning for a recession, or saving for a house payment, there is always a reason to be saving. In this case, when preparing for a recession, you should be putting money towards an emergency fund. This is an account with enough money to cover several months of expenses. These expenses are your bills, but also any money you need to continue living comfortably. This could look like going out to eat, buying new clothing, or going to the movies. Saving for these extra purchases is important because in an emergency financial situation, you will regret not saving for these things.
We’ve written an entire article dedicated to explaining how much you should put in your emergency fund savings account, which could be very helpful when preparing for a recession. If you are preparing for an upcoming recession, it is recommended that you start putting as much money as possible in an emergency fund account. Do your best to create a budget for yourself and your family, and stick to it. Then, put your leftover money that you did not spend on bills and other expenses in your emergency fund. This could help you to build it as quickly as possible, and you may feel more secure in the case of a recession.
Look at Your Investments
There are many investments that will likely lower in value in the event of a recession. For example, if you have a lot of money in the stock market, you could see a large impact on their value during a recession. Real estate investments can also lower in value or become difficult to sell, but as the saying goes, people always need housing or places to work. If you are worried about a recession and are trying to plan for one, look at where your money is tied up with investments. If you feel you are risking too much, consider selling your investments so you can get money back for them now. If you are uncertain about the level of risk that is associated with your investments, consider consulting a financial professional to learn more about your current portfolio.
Consult a Financial Professional
Many financial professionals are highly experienced with helping their clients get their investments in order and prepare for a recession. Additionally, they can point out areas where you, as a unique individual, can save money and put it towards your emergency fund. If you would like help preparing for an upcoming recession, please contact us. We will help guide you through the different strategies you can implement to feel secure and be prepared financially for the next recession.
1 “We are due a recession in 2020 – and we will lack the tools to fight it” Nouriel Roubini The Guardian, Sep 13, 2018
This article is for informational purposes only. Please be advised that this article is not intended as legal or tax advice.