70% of Americans worry about a recession. Here’s what they can do to prepare

Every American is worried about an impending recession — and many are not financially ready for a recession if it happens.

Although a recession has not been officially declared — and a A strong job market suggests the opposite—Just seven out of 10 U.S. adults worry about the possibility of a disease before the end of next year, according to a new source. report from Bankrate. At the same time, just 17% say they are “very ready” financially for a recession, while more than 40% say their finances aren’t going to weather it.

Good news: The vast majority of adults (74%) say they are actively taking steps to prepare financially for a potential recession, according to Bankrate. That includes spending less on discretionary purchases, adding in emergency and retirement savings, paying off credit card debt, and finding a more stable income.

Those are all smart moves if possible, said Mark Hamrick, senior economic analyst at Bankrate.

“It is clear that current economic conditions have weighed heavily on consumer sentiment for a long time,” Hamrick said. Decade high inflation has been costing the budget of many households. But “I appreciate that everyone is taking quite strong action to prepare. We like that they save more for emergencies… because we find that the biggest financial regret of Americans in history is not saving enough. “

That said, 31% of those who said they were neither prepared for a recession nor actively doing anything to improve their financial outlook, according to the survey.

But there are easy steps to take. Here’s what financial advisors recommend you do now if you’re worried about a future recession.

1. Cash hoarding

Niv Persaud, a certified financial planner based in Georgia, says one of the most important things you can do amid economic uncertainty is to save as much as possible in an emergency fund. his level. This should be your top priority, so you can easily overcome the possibility of layoffs or loss of income.

Remember: During a recession, many companies may not hire. So it may take you longer to find a new job than you might expect. While many financial experts recommend saving money for three to six months, Persaud is more cautious.

“Single income households should save at least a year of essential expenses in their emergency reserve,” says Persaud. “Double-income households should save at least nine months for essential expenses.”

Ultimately, however, you need to decide on the amount of savings that makes you feel most comfortable. That said, saving more can help ensure you don’t have to settle for the first job offer you get and give you time to look for the right fit.

Persaud recommends making a list of necessary and non-essential expenses every month. If your budget is tight, consider cutting a few things off your list in the future to boost your savings.

2. Debt repayment

Once you have enough savings, another prudent move is paying high interest rates. This is even more important as interest rates continue to rise and debt becomes more expensive.

This is especially true for variable-rate debt like credit cards. If you have a decent amount of credit, you might consider paying it off with a lower-interest home loan or transferring the balance to a credit card with an introductory 0% interest rate.

With Federal Reserve Likely to Raise Interest Rates AgainHamrick recommends that people prioritize credit card debt, “even as we know that many individuals are turning to debt to cover the cost gap.”

Student loans, especially federal loans, typically have lower interest rates than other types of consumer debt, so it’s not necessarily a priority to pay them off quickly if you have connections. other financial concerns. That said if you have private loans, you can refinance them at a lower rate, which can save you in the long term and give you more money each month to save. thrifty.

3. Continue to contribute to retirement investments

If you’re nearing retirement, it seems like the right time to cut back on retirement contributions. But the opposite is true, said Philip Herzberg, a CFP based in Florida: Recessions are indeed a great time to invest for the long term.

“The market downturn is a golden opportunity to direct positive cash flow to buy stocks at a substantial discount,” Herzberg said. “Don’t be tempted to sell retirement account stocks that have depreciated in value. Missing out on the stock market rally can affect investment performance. “

In fact, if you can afford to, boosting your contributions to tax-advantaged accounts like an IRA or 401(k) is a particularly good move.

4. Consider switching jobs

All that said, many people may not have enough money to save or cut spending, but they’re still worried about a possible recession.

If that’s the case, Bankrate’s Hamrick said the low unemployment rate suggests it’s still a good time to look for a better job. Job hopping can pay off: 60% of workers who changed jobs between April 2021 and March 2022 reported a pay rise, adjusted for inflation, according to a Report is released of the Pew Research Center. Only 47% of workers who stayed with the same employer during that time period said so.

“As long as the job market remains solid or stable – that may not last forever – there are opportunities for people out there if they choose,” Hamrick said.

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