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The idea of a recession can be scary. Read on for ways to ease your mind.
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For much of 2022, economic experts warned consumers to gear up for a 2023 recession. And even earlier this year, those warnings persisted despite the cooling inflation and economic data that told a very different story.
More recently, some financial experts have backed off of their recession fears. In early August, for example, JPMorgan Chase’s top U.S. economist said he no longer anticipates a recession this year. And other big names in the banking world have expressed similar views.
But some people remain convinced that a near-term recession is in the cards. If that’s something that worries you, it’s understandable. But here’s why you really don’t need to panic.
It’s not guaranteed to happen
Many of the recession warnings we’ve heard over the past year and change are just that — warnings. Ever look at the weather app on your phone and see a severe thunderstorm warning for the next few hours, only to experience nothing more than a spatter of raindrops?
Well, we might end up in a similar situation here. Unless those people warning of a recession have a crystal ball at their disposal, it’s more than possible that they’ll end up being wrong, especially since many economic indicators, like unemployment, are not pointing to an imminent recession.
Our next recession could be mild
You might assume that any recession that hits the U.S. will be lengthy, painful, and downright extreme. But recessions can be mild, and that’s something to keep in mind when you hear those scary warnings.
You should also know that recessions don’t always go hand-in-hand with stock market crashes. Similarly, a near-term recession is unlikely to send home values plunging downward given the current state of the housing market. Those are things you can take comfort in.
It pays to prepare nonetheless
Whether we’ll experience a near-term recession is, at this point, questionable. But it’s still a good idea to prepare for one — because if a recession doesn’t hit this year, we might experience one next year, or the year after that.
One of the best things you can do to gear up for a recession is to boost your emergency fund. At a minimum, you should aim for enough cash in your savings account to cover three full months of essential bills, like rent and car payments. The logic is that if you were to lose your job in a recession, it might take three months to find a new one, so your savings should be set up to tide you over in that scenario.
Another good thing to do ahead of a recession is shed needless expenses. If there’s a streaming service you’re paying for that you don’t watch, dump it. You don’t need the recurring charge on your credit card.
Finally, aim to bolster your job skills. Doing so won’t guarantee that you’ll be spared a layoff if economic conditions worsen and your company needs to conserve funds. But you may be less likely to get laid off if you’re more skilled than your fellow employees.
The idea of a recession can be daunting, but there’s no need to lie awake at night losing sleep over that possibility. Instead, focus your energy on getting ready for an economic downturn, because it’s good to be prepared at all times — even when warnings aren’t being sounded.
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