A sign for the New York Stock Exchange is seen on the floor of the NYSE in New York on Wednesday, July 27. Shares were slightly higher on Wall Street early Friday, despite news that closely-watched inflation data is the fastest rising in the last four decades this month. (Seth Little, Associated Press)
Estimated reading time: 7-8 minutes
SALT LAKE CITY – Gas, food and rent prices are skyrocketing. The Federal Reserve has hiked interest rates to their highest level since 2018. The US economy has contracted for two straight quarters.
Economists are divided on whether or not a recession is imminent. What is clear is that the economic uncertainty will not go away anytime soon. But there are steps you can take now to be prepared for whatever lies ahead.
Yiming Ma, an assistant professor at Columbia University, says it’s not a question of if, but when a recession will hit. People should prepare but not panic, she said.
“In the past, the economy was always up and down,” Ma said. “It’s something that just happens, it’s a bit like a cold.”
But she notes that some people’s immune systems are better able to recover than others. It’s the same with finances. If you think a recession could destabilize yours, here are some things you can do to prepare.
Know your expenses and create a budget
Knowing how much you spend each month is key. Ma recommends sitting down and writing down how much you spend each day. This allows you to see what’s coming in, what’s going out, and what unnecessary expenses you might be able to save.
“By understanding what money you’re getting and what you’re spending, you may be able to make changes that will help you through tough times,” advises Money Smart, a financial education program run by the Federal Deposit Insurance Corporation.
Budgets often show expenses that can be eliminated entirely, or impulsive expenses that can be avoided through planning.
For guidance on how to create a budget, free courses like “Make a Budget (and Stick to It)” by CT Dollars and Sense, a Connecticut state agency partnership, and Nerd Wallet’s Budget Calculator can be good places to start.
Save as you can
The more unnecessary expenses you can cut, the more you can save.
It’s not possible for everyone, but Gene Natali, co-founder of Troutwood, an app that helps people create financial plans, says having a budget to save enough to cover basic needs for three to six people is ideal months to cover.
Programs like America Saves, a nonprofit campaign run by the Consumer Federation of America, can help create a roadmap.
And if you have a savings account, it’s important to check whether your bank is giving you a good interest rate and shop around if it’s not, Ma said.
Her advice is to keep an eye on monthly fees or service charges, which could eat up your savings. But don’t limit your options. Online banks sometimes offer better rates than traditional ones.
Consolidate your loans and stop taking on more
When interest rates rise, experts recommend consolidating loans into a fixed-rate loan and, if possible, paying off as much debt as possible.
“Job security tends to be worse when a recession comes, it’s not a good time to rack up debt,” Ma said.
But paying off debt is easier said than done. The Federal Trade Commission’s Consumer Guide to Debt Reduction can help you create a plan.
With interest rates high, it’s also not a good time to take out new loans for big expenses like cars, although experts recommend that you buy durable goods like vacuum cleaners, stoves or dishwashers as soon as possible to avoid future price hikes.
Visit thrift stores and flea markets
Allen Galeon, a home care worker in California, has been hit for months by the rising prices of household items like groceries, paper towels and gasoline for his commute.
His son’s favorite Hi-C orange juice, which cost $1.99 for a six-pack, is now $2.50.
His household has struggled with financial instability since the pandemic began, when Galeon was reduced from taking care of multiple families to a single client to reduce his health risks.
One decision he’s made is to buy things like clothing or electronics second hand whenever possible, whether it’s from Goodwill, pawn shops or Craigslist. And with Craigslist, you can search for areas to reduce driving – which means less gas and inconvenience.
Negotiate your monthly bills
According to Kia McCallister-Young, director of America Saves, since the pandemic, many companies have updated their aid policies and become more flexible with users.
Calling monthly service providers to negotiate bills — whether it’s utility, phone service, cable, internet or auto insurance — can result in significant savings, McCallister-Young said. Individuals can ask for the best price, any available rebates, rebates or coupons that can result in a lower monthly fee. If a vendor is competitive with other companies, there’s an even greater chance of a discount, she added.
“If you tell them, ‘I’m considering switching,’ or that you’re looking around, that helps — if they know you’re considering leaving, they’ll give you the best price, and the goal right now is as much cash flow as.” possible,” she said.
Find out about federal programs like the Low Income Home Energy Assistance Program, which helps cover bills, and Lifeline, which can help with phone bills. If you are unsure whether you qualify for a federal or state program, you can call 211, which will connect you with a local specialist who can assist you.
Change your groceries
Grocery shopping with a meal plan, buying generic drugs instead of brand names, or buying in bulk are some of the Consumer Federation of America’s recommendations.
“Many shops offer price adjustments. So if you show them that a competitor is selling the same product at a lower price, they match it,” McCallister-Young said. “You should also look at the stores closest to you so you don’t spend the extra money you would save on gas.”
An alternative way to save money on groceries is through food-sharing apps like Olio, which connects people in your community to share extra groceries, and Too Good to Go, where customers can buy excess groceries from companies at a discount.
Look at government aid programs
Despite these saving and spending practices, a monthly wage isn’t always enough to cover important expenses. If this is your situation, programs across the country are available to assist you.
“Sometimes there just isn’t enough ‘end of the month’ at the end of the month,” said Michael Best, an attorney at the National Consumer Law Center who specializes in financial services issues.
To take advantage of these resources, verify that you qualify for the Emergency Rental Assistance Program, Supplemental Nutrition Assistance Program, Farmers Market Nutrition Program, or Homeowner Assistance Fund. All of these are federal programs coordinated by state governments. Some states offer additional local programs for their residents.
Look for community help
If you are experiencing food or housing insecurity, look for nonprofit or community organizations in your area. From housing assistance and food banks to utility support, nonprofits across the country can help. National organizations like Feeding America host food banks in all 50 states.
“We’re already seeing the community turn to us in overwhelming numbers because of the country’s economic stability,” said Kavita Mehra of Sakhi for South Asian Women, an organization that helps survivors of domestic violence in New York City.
Her organization provides shelter, food and cash for emergencies to people in the community. She said that between January and June her group distributed over $150,000 in emergency cash assistance to survivors who were having a harder time keeping lights on and putting food on the table. That’s more than all of last year.
Food relief organizations such as Ample Harvest, Hunger Free America, and Food Rescue US provide maps that allow users to locate a nearby food bank by entering their zip code.
Take care of your sanity
Between worrying about the bills and not knowing what your financial future might hold, your stress levels can be through the roof.
“It’s a hectic existence,” said Galeon. “You have to manage a lot and keep a cool head for the sake of mental health.”
Debra Pillow, a clinical director at CBT treatment center Light On Anxiety, recommends recognizing when your body is stressed first. She then recommends mindfulness exercises like breathing, touching a wall to calm yourself, and doing the Five Senses for Relieving Anxiety exercise.
Most health insurance plans cover some type of psychiatric support. If you don’t have health insurance, you can search for sliding scale therapists across the country at sites including FindTreatment.gov and the Anxiety and Depression Association of America Directory.