Suze Orman Says This Is the Biggest Risk in a Recession. Here’s How You Can Prepare

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There is one key step you should definitely take. 

A recession is a period of prolonged economic downturn, and many experts are predicting one will soon hit the United States for a number of reasons, including efforts by the Federal Reserve (the U.S. central bank) to cool inflation by tightening the supply of money.

If a recession happens, that means the economy as a whole is struggling. But, what does that actually mean for you? According to finance expert Suze Orman, the biggest risk that individuals face in a recession has to do with the potential loss of their income.

Orman says this is the biggest threat to your finances in a recession

Orman recently warned on her blog that a recession was “indeed a possibility in 2023,” and she went on to explain that these unfavorable economic conditions present one huge risk for individuals.

“The biggest risk in a recession is a job layoff,” Orman explained. Layoffs are common during downturns because demand for goods and services is reduced during a recession. The easiest and fastest way for companies to respond to this reduced demand is to let go of some employees who may not be needed to serve their smaller customer base.

Unfortunately, if you lose your job during a recession, it’s a bad time to be looking for new work since a whole bunch of other people will be in the same boat — and since few companies will be hiring during the downturn. So, you may have an extended period of time where you have to try to rely on unemployment benefits (if you have access to them based on your job history).

How can you prepare for a layoff?

Since Orman believes a layoff is a huge risk of a recession. She suggests preparing for a potential interruption in your income that could come this year during a downturn. And, she highlights one key step you should take in order to be ready.

“There is no better stress reducer than to have an emergency savings fund,” Orman said. “I want you to push yourself to save as much as you can, but I also want to be clear that consistently saving something each week, or each month, is a big win.”

Beyond putting plenty of money into savings, Orman also suggested taking steps “to boost your job security” so if employees at your company are on the chopping block, you won’t end up being one of them. “My challenge to you is to make yourself the last person your manager would want to let go,” she said.

You can do this by looking for opportunities to add value to the company’s bottom line and to make your manager’s job easier. Orman also pointed out that going the extra mile at work can be helpful even if you do lose your job because you’re more likely to get a good recommendation if you’ve gone above-and-beyond at your current workplace.

Starting to network in case of a job loss is also a good idea. You don’t need to actually look for new opportunities, but be sure to make professional connections as much as possible and try to get to know people in your field before you need to call on them for help finding new work.

Even if a recession doesn’t come this year, taking these steps won’t hurt you and can only help you advance in your career and make your income more secure regardless of what economic conditions come your way.

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