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The US economic recovery could slip back

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Talk about bad news for the economy.

Key points

  • The US economy is in much better shape now than it was at the start of the pandemic.
  • Foreign tensions and runaway inflation could lead to a major reversal.

When the COVID-19 outbreak first hit American soil in early 2020, it sparked an economic crisis that many people were unprepared for. Fortunately, the economy is doing much better today than two years ago. Not only are unemployment levels falling, but there are millions of jobs available.

Despite this progress, JPMorgan CEO Jamie Dimon is not confident in the direction of the economy. In fact, he thinks a combination of the Ukrainian conflict and runaway inflation could pose a threat to the economy and lead to stalled economic growth. And that’s a scenario we all have to prepare for.

Preparing for a recession

Although the US economy is not necessarily on the brink of recession right now, things could get worse as the year progresses. And so it is important to prepare ourselves for this possibility.

Perhaps the best way to prepare for an economic downturn is to stock up on emergency savings. Unemployment tends to rise during recessions, but if you have a good amount of money in your savings account, you may be able to get by if your paycheck disappears or drastically drops for a while.

In fact, as a general rule, it’s a good idea to keep enough money in savings to cover three to six months of essential bills. Remember that even if you are entitled to unemployment benefits following a layoff, these benefits will only replace part of your old salary. Having enough savings on hand could ensure that a temporary job loss doesn’t force you into debt.

And speaking of debt, now might be a good time to work on reducing your credit card balances. Having one less payment to worry about could make it easier to handle a recession, especially if you end up losing your job or having your hours reduced.

Finally, you might want to line up a second stream of income in light of Dimon’s warning. This extra money could allow you to increase your savings and get out of debt before the economic situation deteriorates. Plus, if a recession hits and you lose your job, you’ll be left with a second gig to fall back on. And if it’s a side hustle whose hours you can increase to suit your schedule, you might be able to replace a good chunk of your payment.

Plan for the worst

No one wants to imagine a time of economic distress – not when our last downturn was not long ago and things are looking so much better. But while it is certainly not necessary to panic in the face of an impending recession, it is also a good idea to prepare for it.

One of the main reasons so many people took a financial hit at the onset of COVID-19 is because they had no savings to fall back on and no way to cope with job loss. . If you prepare to weather an economic storm, you’re more likely to weather a recession unscathed.

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