If you listen to news about the economy you may be hearing mixed messages. Some reports talk about economic growth. Some talk about an impending recession.
The U.S. Bureau of Economic Analysis, does just that – analyses the U.S. economy and they report that growth has been OK the last two quarters. So, why then the recession worry? Trade wars, basically. If a trade war does escalate with China there could be a recession. And something called an inverted yield curve is concerning the stock market. An inverted yield curve is when investing in a short term (2-3 years) bond has a higher yield than investing in a long term (10 years) bond. That is the opposite of what we normally see. And the stock market can have an influence on the economy.
It’s big companies, big investors in the stock market, and big organizations like governments that have the most to worry about and have the most influence on the economy.
What Do We Do?
A ‘regular’ recession (not like the great recession of 2008 which we went through not too long ago) is only really worrisome of you happen to be one of the workers who loses their job or gets reduced wages or hours. If you are in a recession proof job, like firefighter or teacher, you will probably weather whatever comes just fine. If, however, you are in a more ‘retail’ environment, one which depends on customers, then you might be affected. But you can plan a “just in case” scenario by doing a couple of simple things.
Save and Reduce
Figure out where you might be spending to the limit of your income and back off. Maybe you eat out twice a week, or Starbucks every day. If you reduce that frequency by half and put those funds in a savings account instead, in just a few weeks you may have enough for a couple of bills. Having money in savings for an emergency such as losing a job, can be a great stress reliever if the time comes.
Reduce your interest where you can. I know we don’t tend to regularly look at what we are paying interest rate wise for our credit cards and other consumer loans, but if there is an opportunity to lower your interest rates do it now. Many companies offer 0% interest on credit card transfers which can save you money.
Pare down where you can now, before things get bad. Do you really use all that data each month? Do you really watch all those cable channels? Do the kids really need new colored pencils or can you find a whole set from the ones in the jar and those that slipped behind the sofa?
Don’t forget insurance. While it’s generally not a good idea to reduce coverage, if you think losing a job could be imminent maybe having full coverage on your 8 year old vehicle is not really necessary?
If you can work more now and put your extra earnings in savings then you might have a couple months of car payments put aside before you know it. Of course, if you just spend that extra money and don’t save any of it you may have fun now but it won’t help you if our economy slumps and you’re directly affected.
What if the worst happens?
If you do lose your job or get your hours reduced then immediately apply for unemployment benefits if they are available to you. You will have to wait a week before benefits kick in (so wouldn’t you be happy if you have saved all that Starbucks money for groceries!). Apply for reduced utility rates so you can begin reaping the benefits right away. Utilities have programs that can reduce your rates up to 20% depending on your household size and income.
Get rid of all that is not necessary. Netflix is not going to ban you for life if you cancel now to save $25 a month. Where else do you have automatic subscriptions or donations coming out of a bank account or credit card? Stopping them all and opting to pay by check at your own timing can save you stress and money. Maybe you won’t really miss that monthly delivery of exotic soaps for a couple months. And you can always start them over once you are back to normal.
Recessions Don’t Last Forever
A recession is a period of temporary economic decline, usually defined as negative growth of the Gross Domestic Product (GDP) for two quarters or more. The thing about a recession is that we are usually a few months into it before we real people actually begin to feel it. And there is a possible upside. If weekly movies are no longer an option, you and your family might find that you love getting Redbox and making homemade popcorn together. You might actually enjoy cooking more than eating out. Finding clever ways of saving and reducing can get your creative juices flowing and making you proud of making the best of what you have. And before you know it, all will be back to growth. It is a normal part of the economy, for it to ebb and flow.