How to recession-proof your life
NEW YORK — Prices for gas, food and rent are soaring. The Federal Reserve has raised interest rates to the highest level, since 2018. The US economy has shrunk for two straight quarters.
Economists are divided over whether a recession is looming. What’s clear is that economic uncertainty isn’t going away anytime soon. But there are steps you can take now to be ready for whatever is ahead.
Yiming Ma, an assistant professor at Columbia University, says it’s not a question of if but when a recession will happen. People should prepare but not panic, she said.
If you think a recession could destabilize your finances, here are some things you can do to prepare.
Make a budget
Knowing how much you spend every month is key. Ma recommends sitting down and writing how much you spend day-to-day. This will help you see what’s coming in, what’s going out, and which unnecessary expenses you might be able to cut.
Budgets often reveal expenses that can be eliminated entirely or impulsive spending that can be avoided with planning.
For guidance creating a budget, free courses such as “Creating a budget (and sticking to it)” by CT Dollars and Sense, a partnership of Connecticut state agencies, and Nerd Wallet’s Budget Calculator can be good places to start.
Save as you can
The more non-essential expenses you can cut, the more you can save.
Programs such as America Saves, a non-profit campaign by the Consumer Federation of America, can help create a roadmap.
And if you have a savings account, it’s important to check whether your bank gives you a good interest rate and shop around if it doesn’t, Ma said.
Consolidate your loans
As interest rates rise, experts recommend that you consolidate your loans to have just one fixed-rate loan and, if you can, pay down as much of your debt as possible. The Federal Trade Commission’s Consumer Advice guide for Getting Out of Debt can help you make a plan.
With interest rates high, it’s also not a great time to take out new loans for big expenses like cars, though experts do recommend that if you need durable goods such as vacuum cleaners, stoves or dishwashers, you buy them as soon as possible to avoid future price increases.
Visit second-hand-stores and yard sales
Allen Galeon, an in-home caregiver in California, has been affected for months by the rising prices of household staples like groceries, paper towels, and gas for his commute.
One choice he’s made is to buy items like clothes or electronics second-hand whenever possible, whether from Goodwill, pawn shops, or Craigslist. And Craigslist allows you to search by area, to cut down on driving — which means less gas and inconvenience.
Negotiate your monthly bills
Since the pandemic, many companies have updated their relief policies and have become more flexible with users, according to Kia McCallister-Young, director of America Saves.
Calling providers of monthly services to negotiate bills — whether it’s utilities, phone service, cable, internet, or auto insurance — can lead to meaningful savings, said McCallister-Young. Individuals can ask for the best rate, any available discounts, rebates, or coupons that can lead to a lowered monthly fee. If a provider is competitive with other companies, there’s an even better chance of getting a discount, she added.
Check out federal programs such as the Low Income Home Energy Assistance Program, which helps cover bills, and Lifeline, which can assist with phone bills. If you are unsure if you qualify for any federal or state program, you can call 211, which will connect you with a local specialist who can assist you.