Experts have been warning that the United States is on the verge of an extended recession for weeks. Now, to be clear, recessions aren’t always lengthy events. Some are short-lived while others have a less severe effect on employment levels than others.
In general, when the economy slackens, economic conditions deteriorate, consumer spending drops, and unemployment rises. And Suze Orman thinks there’s a good chance we’ll enter recessionary territory in late 2022 or early 2023.
She has one important piece of advise for clients in light of that. And it’s worth heeding, especially if you don’t have a lot of money in your savings account.
Conserve, conserve, conserve
Orman advised individuals to save their money in today’s economy. The most essential thing you can do now is save a lot of money, according to Orman. That’s because you may never know what might happen to you during a recession.
While you can’t rule out the possibility of getting fired during a recession, it’s something you can’t ignore. This is especially true if you work in a business that is vulnerable to decreased consumer spending, such as retail or hospitality services.
That’s why Orman claims it’s critical for customers to save money in the coming months. This is especially true for people who don’t have much cash in their savings accounts.
In fact, Orman recommends keeping a year’s worth of living expenses in an emergency fund. That may help you get through a lengthy spell of unemployment. While 12 months’ worth of bills may not be realistic for you, it does pay to start saving and spending less now – in case your personal situation takes a sudden dive towards disaster.
How to conserve funds
When it comes to spending money, many people feel that they don’t have enough. Setting priorities when it comes to spending is one way to preserve money. If you’re worried about it, start by making a budget that breaks down your various costs. Then decide which are negotiable and which aren’t.
For example, a prescription falls into the last category, as does your auto loan payment. However, if you’re paying for things like cable television, streaming services, yoga lessons, or subscription boxes right now, you might be able to reduce your spending on them.
Of course, reducing spending isn’t the only approach to strengthen your finances. You may also attempt to increase your earnings with a side business. The goal, whichever way you look at it, is to ensure that if there is an economic recession on the horizon, you have enough money set aside for emergencies.
Try to stay calm
The thought of a recession may be nerve-wracking — especially if your finances have already been damaged during the Covid-19 pandemic. Rather than worry about a recession, take action.
Consider how you can eliminate expenses, or take additional steps to raise your earnings, in order to free up more money for savings. That’s actually the greatest thing you can do to prepare for a recession – and survive one without too many long-term consequences.