Gas, food, and rent prices are all rising.
NEW YORK (Reuters) – Gas, food, and rent prices are all rising. Interest rates have been raised by the Federal Reserve to their highest level since 2018. The US economy has contracted for two consecutive quarters.
Economists disagree on whether a recession is imminent. What is certain is that economic insecurity is not going away anytime soon. However, there are steps you can take right now to prepare for whatever comes next.
According to Yiming Ma, an assistant professor at Columbia University, a recession will occur not if but when. She advised people to be prepared but not to panic.
“Historically, the economy has always been up and down,” Ma explained. “It’s just something that happens, like catching a cold.”
However, she observes that some people’s immune systems recover more quickly than others. It’s the same with money. If you believe a recession will destabilize your business, here are some steps you can take to prepare.
BE AWARE OF YOUR EXPENSES AND CREATE A BUDGET
Knowing how much you spend each month is critical. Ma suggests sitting down and writing down how much you spend each day. This will allow you to see what’s coming in, what’s going out, and which unnecessary expenses you can eliminate.
“You may be able to make changes to help you through tough times if you understand what money you are getting and what money you are spending,” advises the Federal Deposit Insurance Corporation’s Money Smart, a financial education program.
Budgets frequently reveal expenses that can be eliminated or impulsive spending that can be avoided with proper planning.
Free courses such as “Creating a budget (and sticking to it)” by CT Dollars and Sense, a collaboration of Connecticut state agencies, and Nerd Wallet’s Budget Calculator are good places to start.
SAVE AS MUCH AS YOU CAN
The more non-essential expenses you can eliminate, the more money you will save.
It’s not for everyone, but according to Gene Natali, cofounder of Trotwood, an app that helps people create financial plans, it’s ideal to budget enough to cover necessities for three to six months.
“When a recession hits, job security tends to deteriorate; it’s not a good time to accumulate debt,” Ma explained.
However, paying off existing debt is easier said than done. The Federal Trade Commission’s Consumer Advice guide for Getting Out of Debt can assist you in developing a strategy.
With interest rates at an all-time high, it’s also not a good time to take out new loans for large purchases like cars, though experts recommend that if you need durable goods like vacuum cleaners, stoves, or dishwashers, you buy them as soon as possible to avoid future price increases.
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