Nevertheless, currently opinions vary as to when to expect the recession to kick in. However, estimates range anywhere from 12 to 24 months. But before we go any further let’s refresh our memories on the meaning of inflation and recession.
We’ll keep it real simple because, unless you are an economist; we don’t want your eyes to glaze over while you play elevator music in your head. Therefore, let’s get right down to it.
How to Prepare for Inflation: 6 Tips For Preparing For Recession
Inflation occurs when there is a general increase in prices and a decrease in the purchasing power of your money over a given period of time. We know, We know, boo and hiss! You most likely learned that in Econ 101 in school. But we’re all adults here so let’s press on.
A recession can be defined as a sustained period of weak or negative growth in the Gross Domestic Product (GDP); accompanied by a significant rise in the unemployment rate. GDP is the most commonly used measure for the size of a nation’s economy.
So put it all together and what does it mean for the average working person? It means simply this. You are likely to have less money to buy what you need and may run the risk of losing your job too. Eek.
Obviously, inflation and recession are not happy topics to talk about. However, as the saying goes, “To be forewarned is to be forearmed.” Or, “An ounce of prevention is worth a pound of cure.”
What we’re saying is, if you see the storm on the horizon headed your way; prepare yourself in advance to minimize the potential damage. We’re already feeling the ferocious pinch of inflation and the recession is just waiting to unleash its fury upon us. So let’s prepare to weather the storm now and come out the other side with as little damage as possible.
How to Prepare for Inflation and Recession
Below are 6 tips that you can implement now to minimize the effects of a recession:
1. Build up your emergency fund. Having a safety net will help you ride out the recession or get back on your feet once it’s over. If you can save up to 6 months or more of your wages you’ll avoid having to use your credit cards to cover your expenses.
How to Prep for Inflation
2. Do not keep up with the Jones’ live within your means. Living within your means does not mean depriving yourself of all the things you enjoy. You do have to make wise choices that will help reduce your expenses.
Perhaps you could reduce your living expenses by downsizing your home. A smaller living abode would reduce the cost of utilities and maintenance. If you have more than one vehicle maybe you could sale one of them and save on auto insurance.
3. Pay off your debts. Most of us have debts ranging from mortgages to credit cards to student loans. Other than your mortgage, if you have one, try to focus on paying off your largest debts first.
FACTS: Did you know? Most Americans on average are around $100k in debt. In 2021 the average debt figure was $96,371. Moreover, 8 out of 10 Americans fit this narrative; which means 80% of Americans are experiencing this type of debt.
You could consider taking out a debt consolidation loan to pay off a substantial amount of debt. Generally, the debt consolidation loan will have a lower interest rate than a credit card. Therefore, you will only have one payment to make instead of several.
However, there is a slight warning here. This option is a great one, but you still want to be careful. Be sure to thoroughly research the lender before taking out the loan; and make sure they are verified by the Consumer Financial Protection Bureau.
Ways to Prepare for Inflation
4. Establish your monthly budget. Yes, now is not the time to “ball out.” It’s critical to know how much you spend every month so that you will have enough money to cover all your expenses. Separate your expenses between your needs and wants.
How do you this? You must understand your needs would things like rent, utilities, and insurance. Whereas your wants would be streaming services, gym memberships, and eating out.
Furthermore, you would need to ensure you have enough money each month to cover the cost of your needs. Then it is time to cut. Get serious and trim as much as you can from the cost or your wants.
How to Plan for Inflation
5. Be realistic. It’s all good to have big plans for saving money and making your budget recession-proof. However, don’t set unrealistic goals.
If you decide to save up 12 months of salary, but don’t have the means to reach that goal you’re setting yourself up for disappointment. Just remember this… as long as you are actively working towards improving your situation and making progress; then you will likely weather the recession successfully.
Once the Titanic struck the iceberg, it was going to sink; there was no stopping that outcome. But what would of saved more lives is if the ship had been better prepared with lifeboats. That’s essentially what we are needing to do when it comes to the economy. Due to powers that be the economic situation will “sink;” but if you do your best to prepare now you can be among the “survivors” who will find themselves in a better position financially.
How to Prepare for Inflationary Depression
6. Be supportive. Talk with your friends, family, co-workers and anyone else that you can join with to share resources, labor, ideas and the like. A good community or support group can go a long way in being able to “weather the storm.”
Moreover, think deeply on how to do things outside the box. Does your neighbor grow tomatoes and you grow potatoes? Can you team up and swap your produce? What about daycare or baby-sitting needs? Could you and a sibling with children take turns caring for each other’s children?
Also, networking with co-workers and colleagues now could pay dividends later should you be laid off during the recession. Conversely, you could be in a position to help someone who gets laid off. Whatever the case may be, work on building a little community of your own that can help you now or later down the road.
These tips are by no means exhaustive. If you take a moment you can probably add a few more items to the list on your own. One thing is for certain, the economy is headed for a downturn and you don’t want to be caught unaware.
Recessions are unpleasant but they don’t have to be your downfall. Proper planning and preparation can make a recession a lot less uncomfortable; and most importantly, survivable. Dark economic clouds are forming and a storm is coming, but it will eventually pass. And as always, after every storm, the sun will shine so look forward to brighter days ahead!
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