How to Prepare for a Recession

A person preparing for recession

It was sobering news this summer when Bank of America economists put out projections of a “mild” recession to take place this year. That projection has since been pushed back slightly, but the fact remains that economists believe a recession is very likely in the near future. 

What does that mean to regular people, as opposed to economists? Well, record inflation rates coupled with high personal debt loads and a waffling jobs market have put many people on edge. So far, unemployment has remained low, and job openings have remained high, but some sectors (such as tech) have had increasing layoffs of late. 

Also: the Federal Reserve has aggressively raised interest rates in its last few meetings, and more increases are expected in order to try to put the brakes on continued inflation. Unfortunately, sometimes those moves by the Central Bank can push a teetering economy into a recession zone.

Prepare Now in Case a Recession Happens

When a recession is potentially looming, it is prudent to make sure your finances are fully prepared to deal with any economic conditions that may come along. Here are some steps to take to secure your financial situation, no matter what the economic weather may bring.

1) Save as Much as You Can

The primary concern in preparing for a recession is that the economy is contracting: companies hire fewer people, wages stagnate, and the possibility of losing your job can increase. That is why your number-one move right now is to set aside as much money as you can in savings or in an emergency fund. If you can, save at least a few months’ worth of income in your bank account. That way you can keep yourself afloat in the event of a job loss during the recession. 

2) Take Down Risky Investments

Right now is the time to reduce your exposure to risky or speculative investments. There may be a time and place for these investments in certain economic climates, but you want to be as far away from them as you can get when things start to get dicey. This is why it is highly recommended that you consider what you have your money in right now and perhaps cash out those positions that are overly speculative. 

3) Look for a Stable Career or a Side Hustle

If you already work in an industry that is stable, then great; count yourself among the lucky ones. But as the economy destabilizes, jobs that aren’t very secure — hospitality, retail, restaurants, entertainment, and manufacturing are among the sectors that feel the punch first — are the first place where contractions take place. 

It’s not always possible to rethink an entire career, but now might be the perfect time to spread yourself a little thin and start your own side hustle. Pursue any small-business idea you have, or create an always-in-need service business, whether housecleaning, babysitting, driving, delivery, or security. 

4) Reduce or Eliminate Debt Pre-Recession

It is a major problem to try to deal with debt when a recession hits. We may feel comfortable carrying a certain amount of credit card debt when we are safely employed and the economy is simmering. But debt quickly becomes a noose that tightens around your neck when interest rates are climbing, inflation is driving prices up, and your job security wavers.

Now is the time to consider a debt consolidation loan or paying off all your debt in another way. You can always try the “snowball method” of paying the smallest debts first or the “avalanche method” of paying the highest-interest debts first. But if you already feel squeezed, those methods might not work for you. Look into whether you qualify for a debt consolidation loan, which can usually offer you a lower interest rate than what you are paying now — and you can wipe out your debt in one fell swoop with the loan. 

5) Speak with a Financial Advisor

Sometimes the best thing to do is to speak with an expert. If you have a financial advisor that you trust, then you should consider speaking with that person about your current state of affairs. He or she can provide guidance about which steps are most prudent for you to take at a time like this. 

If you’re struggling with credit card debt, take action now, and speak with an advisor at Brice Capital. Ask if they can help you get rid of your high-interest credit card debt before you find yourselves in the middle of a recession.

Who Else Wants To Retire Early and be Free?

retiring early and looking to the future

At times, it can seem like staying in the workforce grind isn’t worth it any longer. As one gets older it’s natural to want to take things easier and enjoy freedoms that have been earned from a lifetime of work. The standard age of retirement in the United States is roughly 67 years of age. 

However, you can retire a full five years earlier at age 62. There are pros and cons to this decision, and it should not be made lightly. However, if you’re ready to get some of your freedom back, here are the things you need to know and consider about retiring early.

Understand Your Money Situation

Your thirst for freedom is valid. You’ve worked hard in your life and want to reap the rewards. However, you need to understand that choosing to retire early can drastically affect what your financial situation looks like for the rest of your life. Take, for example, your social security check.

If you were to retire at 67 you could receive the full amount of possible money from your Social Security. However, retiring as soon as you can will bring in less money. This may not necessarily be a deterrent for you based on your needs. It is simply something to be mindful of.

If YOu Retire Early, What Does Your Budget Look Like?

One of the most important steps you need to take if you intend to retire early is to assess your yearly spending habits. How much did you spend on utilities? Do you rent or own your home? Add your yearly housing costs to the list. Compare that with the amount of money you are estimated to receive and you will start to form an idea of what your financial situation may look like.

This may seem like a daunting task to take on. This is where speaking to a financial adviser could really be a benefit for you as they would be able to help you put together a realistic idea of what you would have to spend to get through the year while relying on your Social Security check.

Look at Remaining Debts

It  needs to be said that if you are considering early retirement, you should also be considering how you plan to resolve any outstanding debts that you may have. Making new arrangement with your debtors may be something that you have to do in order to achieve your retirement goals.

Consider Investments

You may still want (and need) to make money after you’re retired. It may behoove you to place investments that can earn you money back. Once again, this is a matter in which speaking with a financial adviser can give you the information and insight you need in order to decide if making such investments are the best plan for you and your retirement.

What Will You Do With Your Time?

It is easy to imagine a life of retirement as simply kicking back in a lawn chair with a cold lemonade and bidding goodbye to your worries. But it may not take long to realize that you may find that version of retirement to be a bit boring after awhile. 

You should make up a list of things that you would like to do with your retirement. Having a game plan like that can not only give you a sense of purpose during your retirement, it can actually save you money in the long term because you will not waste time, energy, and money trying to figure out what you want to do on a day to basis.

Retirement Doesn’t Necessarily Mean Retiring

When talking about retirement it is easy enough to think of retirement as the end of working in one’s life. However, whether you feel you are not getting enough money or because you are likely to become restless, you should know that collecting your retirement does not mean you have to quit working altogether. 

You can choose to take up a side hustle: Turn a well-loved hobby into a business opportunity or even take up food delivery. There are numerous things that you can do to continue to bring in money, even after you have technically retired. Best of all, none of them lock you into a contract and they allow you to work at the pace that you desire. You can stay as busy as you would like.

The Plan is Worth It

It may seem headache-inducing to have to plan out how you want to live post-retirement. However, having no strategy at all could turn the retirement itself into a big headache if you are not careful. Being smart with your financial and life plans will help you get the most out of retirement to ensure that it is as enjoyable as possible.