| | | | | | Some economists are saying the U.S. could soon be in a recession, if it isn't already. I'm not sure about you, but it's making me a little anxious.
Inflation is at a 40-year high, with gas prices hitting $5 a gallon and everyday purchases becoming more and more expensive. Interest rates are rising. The stock market is taking us on a rollercoaster ride right now, terrifying drops included. Crypto is crashing, too.
This is easier said than done and might sound a little crazy — but you should focus less on what's going on in the actual economy and more of what's going on in your own personal economy, according to one expert. Sophia Bera Daigle, CFP and founder of Gen Y Planning, says a lot of the financial advice that she would normally give applies just as much now as it does during times of economic growth.
That means following the same foundational principles you would normally to put your finances on solid footing, even if there's a looming recession.
Start with a financial plan — either continue following the one you have in place or put a new one together. Have a budget, avoid taking on excessive debt, and invest for the future.
Above all, prioritize building an emergency fund if you don't already have one, so you have some cushion if you experience job loss or have to pay unexpected medical bills or expensive vehicle repairs. The amount of money you should have in an emergency fund is something only you can decide, but most experts recommend saving up at least three to six months of expenses.
Once you feel good about your emergency fund, prioritize paying down any high-interest debt and invest, invest, invest. Investing early and often is a sure-fire way to build long-term wealth and you don't want to put it off.
"I think it's a really great time to keep saving for retirement, the stock market is down and stocks are on sale," Bera Daigle says.
Now is also a good time to focus on developing your professional skills and experience to "recession-proof" your main source of income, and find creative ways to make extra money. Building a side hustle, freelancing, or working a part-time job could all add extra security to your budget.
I'm trying to put my anxiety on our economic situation aside and stay on track with my own financial plan. The stock market is down, but I'm investing more than I ever have in my life. Yes, it's painful to look at my portfolio right now, but I also know that in the long run, the stock market averages a 10% return on investment. I won't need that money for years, so it's best to let it do its thing through thick and thin for as long as possible.
I'm also leaning on my budgeting app more than ever to really be on top of what's coming in and out of my bank account. And even though borrowing is getting more expensive, I'm taking advantage of the fact that interest rates are rising by opening a high-yield savings account to stash my emergency fund.
Recessions are all about weathering the storm. Since World War II, recessions have lasted an average of around 11 months, but usually by the time it's officially announced, we've already been in it for six months. While the word "recession" has been driving my anxiety up a notch or two (and maybe you feel similarly), I'm reminding myself that having a strong financial plan in place will help me get to the other side of the road.
What do you think of these weekly emails? Any other topics you're interested in reading about? Tell me at alex@nextadvisor.com or @AlexGailey on Twitter.
| | | |  | | |  | | | | THE BOTTOM LINE | | The best financial strategies apply regardless of whether or not we are entering a recession. It's always a good time to pay down debt, build your emergency fund, and develop skills that can lead to a more lucrative career. | More soon,
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great tips like these. | | | | | | | |  | | | |
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