How to recession-proof life amid economic chaos

Prices for gas, food and rent are soaring. The Federal Reserve has raised interest rates to the highest level since 2018. The U.S. 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 any time 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.

“Historically, the economy has always been going up and down,” Ma said. “It’s something that just happens, it’s a bit like catching a cold.”

But, she notes, some people’s immune systems are better able to recover than others. It’s the same with finances. If you think a recession could destabilize yours, here are some things you can do to prepare.

Know your expenses and 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.

“By understanding what money you are getting and what you are spending, you may be able to make changes to help you through tough times,” advises the Federal Deposit Insurance Corp.’s Money Smart, a financial education program.

Budgets often reveal expenses that can be eliminated entirely or impulsive spending that can be avoided with planning.

Save as you can

The more nonessential expenses you can cut, the more

you can save.

It’s not possible for everyone, but Gene Natali, co-founder of Troutwood, an app that helps people create financial plans, says it’s ideal to budget to save enough to cover basic necessities for three to six months.

Programs such as America Saves, a nonprofit campaign by the Consumer Federation of America, can help create a road map.

And if you do 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 loans, and don’t take any more

As interest rates rise, experts urge you to consolidate your loans to have just one fixed-rate loan and, if you can, pay down as much of your debt as possible.

“Job security tends to be worse when a recession comes; it’s not a great time to accumulate debt,” Ma said.

But paying off your existing debt is easier said than done. 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, 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.

Since the start of the pandemic, when he cut down from caring for multiple families to a single client to reduce his health risks, his household has dealt with financial instability.

One choice he’s made is to buy items like clothes or electronics second-hand whenever possible, whether from Goodwill, pawn shops or Craigslist.

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, McCallister-Young said. 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.

“If you tell them, ‘I’m thinking of changing’ or that you’re shopping around, that helps — if they know you’re considering leaving, they’ll give you the best rate, and the goal right now is to find as much cash flow as possible,” she said.

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.

Switch up your groceries

Grocery shopping with a meal plan, buying generic rather than brand-name or buying in bulk are some of the recommendations from the Consumer Federation of America.

“A lot of stores have price matching, so if you show them that a competitor is selling the same product at a lower rate, they’ll match that,” McCallister-Young said. “You also want to be looking at the stores that are closest to you, so you’re not spending the extra money you’d save on gas.”

An alternative way to save money on groceries is to check out food sharing apps such as Olio, which connects people around their community to share extra grocery items, and Too Good to Go, where customers can buy businesses’ surplus food at a discount.

Look at government assistance programs

Even with these saving and spending practices, a month’s wages aren’t always enough to cover important expenses. If this is your situation, programs around the country are available to assist you.

“Sometimes there just isn’t enough ‘end of the month’ at the end of the month,” said Michael Best, an attorney at the National Consumer Law Center who works on financial services issues.

To make use of these resources, check if you qualify for the Emergency Rental Assistance Program, Supplemental Nutrition Assistance Program, Farmers Market Nutrition Program or the Homeowner Assistance Fund. All of these are federal programs coordinated by state governments. Some states offer additional local programs for their residents.

Look for community assistance

If you are experiencing food or housing insecurity, look for nonprofit or community organizations around you. From housing support and food banks to utility assistance, nonprofit organizations around the country can help. National organizations such as Feeding America host food banks in all 50 states.

“We’re already seeing the community reaching out to us in overwhelming numbers because of what’s happening in the country in terms of economic stability,” said Kavita Mehra of Sakhi for South Asian Women, an organization that helps domestic violence survivors in New York City.

Her organization provides housing, food and cash emergency assistance for people in the community. She said that from January to June, her group distributed over $150,000 in emergency cash assistance to survivors who were having a harder time keeping the lights on and putting food on the table.

That’s more than all of last year.

Food assistance organizations such as Ample Harvest, Hunger Free America and Food Rescue US offer maps that allow users to search a nearby food bank by typing their zip code.

Take care of your mental health

Between worrying about the bills and not knowing what your financial future might look like, your stress levels can go through the roof.

“It’s a hectic existence,” Galeon said. “You have to do a lot of managing, and you have to keep a cool head, for the sake of your mental health.”

Debra Kissen, a clinical director of Light On Anxiety CBT Treatment Center, recommends first recognizing when your body is stressed. Then she advises mindfulness exercises such as breathing, touching a wall to calm yourself and completing the “five senses for anxiety relief” exercise.