How to fight “recession fatigue”

Nearly a third of Americans say they are unprepared for a recession and are not taking steps to prepare their finances, according to a recent Bankrate poll.

Experts call it “recession fatigue” and that may be why younger generations in particular are not taking active steps to deal with an economic downturn.

“Recession depression, recession fatigue – whatever you call it, the blows to Americans’ financial security continue to occur, first with the devastating coronavirus pandemic, followed by inflation high for 40 years and now the growing risk of another downturn,” said Sarah Foster, an analyst at Bankrate.com. “Maintaining the motivation for more than two years to prepare for tough economic times can undoubtedly seem exhausting.”

Bankrate’s poll found that 40% of Gen Z (ages 18-25) say they are unprepared for a recession and are not taking action to get their finances in order. This compares to 31% of unprepared millennials (26-41), 30% of Gen X (42-57), and 27% of baby boomers (58-76).

Gen Zers also say the pandemic has interrupted their formative years and feel slighted that major life events, like proms and high school and college graduations, had to be canceled.

“Recession fatigue is the troublesome cousin of revenge spending,” Foster said. “Americans have been deprived of so many activities that bring them joy. It’s a bit like financial apathy.

Experts say some Americans may not be preparing for a recession because they simply don’t know how to handle it. Many have never experienced an environment of high inflation and rising interest rates. For many Gen Zers, the closest thing to a serious economic downturn is seeing how the Great Recession of 2007-2009 affected their parents.

Federal Reserve Chairman Jerome Powell recently warned that the central bank’s aggressive interest rate hikes to combat stubbornly high inflation could cause “some pains,” including a rise in the unemployment rate.

A growing number of Americans now believe that the Fed will not be able to achieve a “soft landing” or rein in prices without tipping the economy into recession. According to a recent MassMutual poll, 49% of respondents said they thought there was likely to be a recession next year. Experts seem to agree. A survey by audit, tax and advisory firm Grant Thornton reveals that 72% of CFOs believe Fed rate hikes will trigger a recession.

Although the best time to prepare for a recession is often before it even begins, it’s never too late to get your financial house in order.

Start by identifying unnecessary expenses and deciding where you can reduce. Consider cutting back on subscriptions to monthly magazines or streaming services, eating less, or stopping ordering food delivery.

Put the money you save into an emergency fund. As a general rule, try to have at least three to six months of expenses set aside in case of job loss or unexpected medical expenses.

Once you have your emergency fund, prioritize paying off your debt, especially high-interest credit card balances.

Fed rate hikes push the cost of outstanding balances even higher. Over the past six months, the average annual percentage rate on a credit card has fallen from 16.17% to 16.65%, approaching a record high of 17.14% in 2019, according to the Fed.

If you have balances on multiple credit cards and have good credit, consider consolidating them into a 0% interest rate transfer card or consider taking out a low interest personal loan to pay off your higher interest credit card debt.

Finally, find a side activity that you enjoy. This does not necessarily mean taking a second job. It could mean turning your hobby, like jewelry making or photography, into a source of extra income.

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