Financial Tips As Recession Talks Loom

It’s certainly been quite a year, with the stock market having its worst first half of the year since 1970. As we’ve been weathering this extreme market volatility and watching the Federal Reserve hike interest rates to combat hot inflation, many believe a recession is near if not already here in some sense. With talks of a recession being thrown around, many are worried about what that might look like for them and ways that they can prepare. So, let’s take a look at some ways you can prepare and stay on top of your finances in the case of a recession. 

First and foremost, recession or not, establishing a financial plan should be your priority. Despite what the future holds, all the economic change in the fast few months should be an indicator of the importance of a financial roadmap and financial organization. If you already have a financial plan, now is a great time to revisit it to ensure your plan is equipped to weather not only the good times, but the bad as well. 

Next, think about adjusting your budget. We’ve been talking about this a lot, but with record-high inflation numbers and the Federal Reserve rising rates, many individuals are feeling the impacts of rising prices in their day to day. If you are feeling it too, you might want to think about cutting out old unused subscriptions or just accounting for inflation within your budget to ensure your cash flows align. 

Another tip when anticipating a recession is funding your emergency bucket. Your emergency fund is a crucial safety net to have, especially during uncertain and unprecedented times. Make sure you are comfortable with the value within your emergency fund in case you need to utilize those funds. Today, jobless claims hit its highest level since January coupled with surging layoffs, so update your resume and always protect yourself in the event of layoffs. 

In this rising-interest rate environment, we want to touch on variable interest rate debt and paying off your loans. If you are in the position to, think about paying off your debt, especially ones with variable interest rates, that could continue to increase with the Federal Reserve rate hikes. 

Most importantly, remember the importance of sticking to your long-term plan and try not to get too spooked by the markets. We know market volatility can be stressful, but it’s prudent not to derail years of your time in the market. Re-visit your asset allocation and ensure you are properly invested in the market. If you are having trouble sleeping at night because of your portfolio, you may be allocated incorrectly in correlation to your risk tolerance, so think about reassessing that as well. While these are only a few points to think about, if you have any questions about your personal financial situation or would like to establish a financial plan, we are here to help. Email us at info@shermanwealth.com or schedule a complimentary intro call here.