Talk about a troubling thought.
- Recent data reveals that most Americans expect a short-term economic slowdown.
- It is important to consolidate your finances before a recession.
The COVID-19 pandemic dealt a heavy blow to the US economy in the spring of 2020. Fortunately, things have improved tremendously over the past two years. Unemployment is down nationally and the availability of jobs is strong. But these conditions may not last forever.
In a recent CNBC+ Acorns Invest in You survey, a healthy 81% of American adults said they believed the U.S. economy would fall victim to a recession in 2022. This sentiment was expressed in late March, at a time when stocks had finally begun to emerge from a slump. And whether it’s fair or not, it’s clear the public is worried about an economic slide.
What defines a recession?
There are different measures that can be used to define a recession. In short, however, a recession is a period of significant decline in economic activity.
It should be noted that recessions do not always lead to stock market crashes or real estate crashes. They can, however, lead to widespread job losses. And that’s something to be prepared for.
How to prepare for a recession
There are a few key steps you can take to prepare for a recession. For one thing, make sure you have a solid emergency fund. At a minimum, you should have enough cash in your savings account to cover three months of essential bills. For even more protection, aim for up to six months of spending in the bank. That way, if you lose your job, you’ll have a solid cushion.
It’s also beneficial to try to get rid of high-interest debt, such as credit card balances, if your income allows it. You may need to cut spending to pay off your debt, but getting rid of it before things get worse could save you a world of stress.
Finally, see how to get a side hustle. This may, at first glance, seem like a fashionable thing. But in reality, a second job could allow you to increase your savings, reduce your credit card debt and give you peace of mind. After all, that side gig could potentially become your full-time gig if you lose your job.
Of course, if you work full time, you may not be able to devote as many hours to a short-term side hustle. And it doesn’t matter. Even if you start out by putting in a few hours a week, you can use this gig to earn a little extra income and increase those hours if the need arises.
How worried should Americans be?
Because the economy is so strong right now, many economists aren’t particularly concerned about a recession hitting this year. But that doesn’t mean it’s not possible.
Rather than losing sleep worrying about a recession, a good bet is to take steps to prepare your own finances for one. This way, you’ll be in a strong position to weather a potential storm, whether it comes or not.
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