7 Tips on How to Prepare for a Recession Whether It’s Coming or Not

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inflation its highest level in 40 years. Interest rates are rising. Gas prices hit horribly $5 a gallon.

Stock market takes investors roller coaster ride Terrifying drops. Even if you haven’t looked recently, you know that the value of your retirement account has gone down. Cryptocurrencies has crashedunsurprisingly.

And now you hear we might be in a recession, or that one is inevitable.

You remember the Great Recession and how tough it was for many. So telling you to “calm down” or “this too will pass” doesn’t address the anxiety you feel about your financial well-being.

It’s okay if you don’t feel right.

Most Americans expect inflation to get worse, according to a post-school Shar poll

But what you shouldn’t do is take steps based on recession fears that could put you financially worse off.

Recessions don’t last forever.

A higher interest rate will affect anyone with a mortgage, car loan, savings account, or money in the stock market. (Video: Daron Taylor/The Washington Post)

On average, recessions last 11 months, according to Lindsey Bell, chief markets and money strategist at Ally. The shortest recession on record is the pandemic-induced recession in 2020, which lasted just three months.

Here are seven tips to protect yourself whether or not a recession is coming.

1. Don’t be afraid of a bear market. You may not even know what a bear market is but you are prepared to be petrified by one of them.

This week, the S&P 500 Index Slither into a bear marketwhich is defined as a decrease of 20 percent from a recent high.

The average bear market duration since 1950 is about 418 days, according to Anthony Saglimpin, global markets analyst at Ameriprise Financial.

“Change your perspective a little bit and see it as an opportunity if you’re a long-term investor,” Saglimpin said.

Suggest focusing on companies that have strong budgets, strong cash flow, and products that consumers use and need.

The stock market is in bearish territory. what does that mean?

“Healthcare and consumer goods companies have often done well in recessionary environments because people need their products regardless of the economic environment,” said Kristen Benz, director of personal finance at Morningstar.

It’s a good time to take advantage of “dollar cost averaging”, which means that you invest the same amount of money regularly regardless of market volatility.

Although stocks are taking a hit at the moment, they are historically recovering well after a recession. If you don’t have exposure to stocks, you miss out on the eventual recovery.

“If you have the money to run it today, now is the time to talk to an advisor and see what a good strategy for calculating the average dollar cost over time could be,” Saglimpin said.

In the long run, experts say, slow and steady buying of stocks easily outperforms trying for market dips

2. Don’t try to time the market. Many people may want to get out of the stock market or reduce what they invest until things improve. This is the definition of trying to time the market. It’s impossible to know the best time to get out and when to get back in.

Mark Hamrick, chief economist at Bankrate.com. Even Warren Buffett would admit it.

Once we hit the low point in a bear market, Saglimpin said, stock returns for the S&P 500 tend to be above average.

“One of the things we always train investors and advisors to do is when you’re in a recession or in a bear market, you don’t want to make big adjustments to your allocation until the dust has settled,” Saglimpin said. “If you diversify correctly, you are weathering the storm. The worst thing an investor can do right now is try to time the market bottom.”

We are still in the doldrums even though the stock market is down

3. Get rid of your credit card debt. Currently. “The first task for anyone with a credit card is to pay off their balances as quickly as possible,” said Matt Schulze, senior credit analyst at LendingTree. “When a recession is on the way and interest rates are rising quickly, it’s even more important.”

One way to tackle debt is to take out a low-interest personal loan or sign up for a balance transfer credit card. You can get out of debt faster if you convert high-interest debt to a credit card at a rate of 0 percent.

If you don’t qualify for a 0 percent credit card, contact your current credit source and ask for a lower interest rate, Schulze suggested. “About 70 percent of people who ordered one in the last year got one,” Schulz said. “But very few people ask.”

Balance transfer credit cards can be a good deal — for some people

4. Stock savings. Save while you have extra cash because a recession can quickly change your circumstances.

If you don’t have a good emergency fund, consider canceling a vacation or putting off an expensive renovation project that isn’t necessary.

“For a lot of people right now, this problem of inflation is like an emergency,” Hamrick said.

He said you don’t want to go into debt if you lose your job or because your salary doesn’t keep pace with historically high inflation.

Also keep in mind that the standard advice of having three to six months of living expenses may not be enough.

“It makes sense for workers to determine the appropriate size of their contingency reserves based on their particular situations,” Benz said.

Younger workers may have more flexibility in their lifestyle to have a roommate — or two — or switch career paths to take advantage of new job opportunities. So their contingency reserves can come close to the three to six-month living expenses recommendation.

But if you’re an older worker and can’t change your residential status and/or are in a high-paying specialized job, and it may take longer to replace your income if you lose your job, err on the side of getting a year’s worth of savings or assets that you can easily liquidate.

This is why it is time to separate from your bank

5. Create a backup for your emergency fund. In addition to having a fund for slack rainy days, Benz recommends knowing where you might go for extra cash if you need it when necessary.

“A home ownership line of credit can make sense in this context, and it’s best to have it when you are employed and most likely to qualify,” she said.

6. Don’t underestimate the power of having bonds in your retirement portfolio. Usually when stocks go down, bonds Balance your stock holdings. But bond prices were hit as well.

However, in previous recessions, Benz noted, bonds have held up better than almost any other sector of the market.

“In other words, don’t throw them in the sea because they’re not doing well now,” she said. “It’s an essential component of a portfolio, especially for people who are at or close to retirement age.”

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7. Have a side party. Many employers beg for workers.

There is a record number of job opportunities, with Unemployment rate 3.6 percent. The economy saw job gains in transportation, warehousing, entertainment, hospitality, education, health services, government, according to to the Ministry of Labour.

“But there is clearly a risk that unemployment will rise,” Hamrick said.

Even if you don’t need the money right now, it might be a good time to get a second job or find work in the temporary job economy to boost your income and savings. Now is the time to prepare for the worst and hope for the best.