Every day another financial expert seems to have predicted that the United States will soon enter recession.
Last week saw the largest interest rate increase in 28 years in the Federal Reserve’s effort to combat inflation. As the economy continues to deal with sky-high gas prices, a shaky stock market and ongoing labor shortages, it looks like we are going to see a decline in economic activity with rising unemployment, stock market downturns and economic activity. Reduction in wages and benefits.
But here’s the thing, we’re already in a recession, and it’s still unknown, according to Howard Dworkin, CPA and president of Debt.com.
What is a recession?
“Economists define the recession as two consecutive quarters of negative growth – that is, decreasing output and increasing unemployment. There is a problem with that definition: you are not sure if you are in a recession for about six months,” Dworkin says. “We can read tea leaves and make educated guesses, but we can’t confirm that until two quarters are over. By that time, of course, it’s too late to prepare.
So at this time, it is unclear whether we are really in a recession or not, because we don’t know until we have a two-quarter recession, although there has been a decline in gross domestic product (total value of goods and services produced in a given period) in the first quarter of the year.
It is not advisable to start preparing for a possible recession when one finally arrives, but it is better to never be late.
“Preparing for a recession is like preparing for a natural disaster: you do it even when you don’t know exactly what you want. I live in a hurricane country and I buy my supplies before the hurricane season,” says Dvorkin. “When will someone hit me? Hopefully never. But I am not one of those desperate people who struggle to buy last plywood and bottled water the day before the storm.
How to prepare for recession
Even if you do not personally lose your job, money is still tight during a recession. The two best steps you can take immediately are to start saving for an emergency fund and see how you can save money on your daily expenses.
“Always be prepared for the recession,” says Dworkin. “You should always drop a few dollars for an emergency fund. You should always be saving as much as you can on gas, food and clothing. Otherwise, during the recession, you are six months late.
Dvorkin points out that more than 70% of consumers “waste more than $ 50 a month on recurring payments for things they don’t need,” such as subscriptions to unused gym memberships and periodicals. So if you’re paying for a gym that doesn’t go, consider biting and canceling the bullet. (If you’re serious about getting in shape you can always find free exercise programs on YouTube.)
There are apps to help people find the cheapest grocery stores and gas prices in their area (most of them are local, though Insert Basket is popular for groceries and TheStreet has found several to help with gasoline.
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But Dworkin said, “There is no shortage of apps that suggest cheap gas or good deals in your local grocery chain. The ‘Killer App’ is a budget app.
“It’s the only app to govern them all – because it saves you money all the time. Whether it’s a free app like Mint or a paid app like YNAB, or using the latest technology offered by your bank or credit union on your website, you can make the math at your monthly cost easier.
One important way is to budget for food, expenses and utilities based on your current salary, how much you want to save, what you can reduce and what not to do, and stick to that budget. Make it through the economic downturn. This is not easy for some people, but a budget app can help even the most unorganized person get their ducks in a row.
“Recommending a budgeting app is like recommending a mayonnaise brand. Some people like craft, others are Hellmans. But they’re both doing the same thing.
How to save money for an emergency fund
Some people don’t have much money at the end of the month or have a clear idea of how much they actually spend and what they spend. That’s where apps like Mint and paying close attention to your credit card bills might actually come in handy.
Some dollars can also be kept constant, adding up over time, month after month. So if you are not a savior much, now is a good time to start.
“Many people get tired of their emergency budgets. They think, ‘I can’t contribute more than a few dollars a week, so what good is that?'” Says Dworkin. Does not happen. In good time, you can extract a small, regular amount, which adds to the time required.
“Don’t start an emergency fund today and wait to use it tomorrow. Start one now so next year it will be for you – and hopefully, you won’t need it for many more years.