New York Life | October 24, 2023
A recession is a period of economic decline, typically defined as two consecutive quarters of negative GDP growth. Recessions can have a significant impact on individuals and families, leading to job losses, reduced income, and difficulty paying bills.
While it's impossible to predict for certain when a recession will occur, there are a number of things you can do to prepare your finances in case one does happen. Here are six tips:
An emergency fund is a savings account that you can use to cover unexpected expenses, such as a job loss or medical emergency. Aim to save at least three to six months of living expenses in your emergency fund.
High-interest debt, such as credit card debt, can make it difficult to make ends meet during a recession. Make a plan to pay down your debt as quickly as possible.
Take a close look at your budget and identify areas where you can cut back on spending. This could include eating out less, cancelling unnecessary subscriptions, or shopping around for cheaper insurance rates.
If possible, try to increase your income to give yourself more financial flexibility. This could involve getting a part-time job, starting a side hustle, or asking for a raise at work.
Don't put all your eggs in one basket. Diversify your investments by spreading your money across different asset classes, such as stocks, bonds, and real estate instruments. Note, diversification does not assure a profit or protect against market loss.
If you have any concerns about your finances, talk to a financial professional. A financial professional can help you develop a strategy to prepare for a recession and other financial challenges.
Recessions can be difficult, but by taking steps to prepare your finances, you can weather the storm and come out stronger on the other side.
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