The talk of the town over the last couple months has been the dreaded “R” word. Yes, I am talking about a recession. For those who don’t know, a recession is two quarters, or half a year of negative growth in the economy. Technically, we are in a recession based on that definition. However, many have been reluctant to say we are in one, including our president and his administration. When there is a recession, people lose their jobs and as of lately, the job market has continued to boom. In July alone, the economy added more than 528,000 jobs. This, along with other signs, show that the economy is still quite healthy, in spite of some bumps and bruises.

Still others see this as one of very few signs that things are going well with the economy. High inflation and stagnant wages have put a damper on what was a rip-roaring housing market and stock market during the height of the pandemic. Whatever side you are on, there are things we should and should not do to prepare ourselves.

Bolster your emergency fund

During times of uncertainty, one of the best things to be able to fall back on is the fact that if Murphy’s Law decides to hit your doorstep, you are prepared with a cash reserve. Saving to fund an emergency fund is most definitely not as sexy as investing in tech stocks or the “next big thing”, but it can most certainly help you avoid catastrophe, and keep you afloat.. As many Americans can’t handle a $500 emergency without worry, making sure your rainy day fund covers at least one to two months expenses, can help you rest easier during tumultuous times.

Spruce up your resume

As recessions go, jobs may downsize, cut people’s hours, or reduce pay in order to avoid going under. To be proactive, it is wise to prepare for a recession before it invites itself in the front door. Currently building up your professional skills can be a way to prepare for a recession. Now may be an optimal time to take that course you’ve been wanting to take, increasing your leadership skills to take on more responsibility at work, and making yourself indistinguishable. During the early parts of the pandemic people left their jobs in droves and saw an increase in pay of almost 10%. The opportunity to acquire more useful and transferable skills allows you to have more options, especially if things out of your control, like a recession, come to pass. 

Maintain your long-term investments

Many people’s investment portfolios have been torn apart over the first half of the year, even with a significant bounce in July. Now is a great time to reassess your investments and where your hard-earned money is going. Many people see their balances going down and fear can take over, making people do rash things that will be to their ultimate detriment. Ups and downs in the markets are both normal and healthy. The stock market, on average, has returned more than just parking money into a savings account, including with inflation. Time in the market always beats trying to time the market, so look at your investment plan, but don’t let fear ravage your portfolio.

Side hustles for extra cash

Side hustles have been all the rage over the last several years. Whether it’s to pay off extra debt, fund a summer vacay, or to grow your emergency fund, these small jobs can make all the difference. As a recession may or may not be around the corner, being prepared for one with extra cash gives more flexibility and security. Some of the most common side hustles include DoorDash, babysitting, dog walking, and selling digital products. Other newly emerging side hustles include renting out your car, blogging, online coaching, and consulting work. Whatever yours may be, utilize that extra time you have to beef up your capital.

Don’t take on new debt

One sure way to be in a compromising situation during a recession is to take on more debt than you should. Evaluating what is necessary and what is possible is always a financial practice to live out, but even more so when times aren’t as bountiful as usual. Examining our needs vs. our wants helps us to avoid making a purchase that will come back to haunt us. Patience practiced in a thoughtful and focused way is always rewarded.

Say no to an ARM

An ARM, or adjustable rate mortgage, is often enticing to those looking for a lower interest rate when first purchasing a home. Unfortunately, in a rising interest rate environment, having an ARM is like having a grenade with the pin pulled and nowhere to throw it. Some may have seen the writing on the wall in early 2022, but those who decided to get adjustable rate mortgages are now going to be left “holding the bag”. To prepare oneself for when the music stops, sticking to a fixed-rate mortgage makes things a lot easier to navigate.

Recessions, poor stock markets, a slowing economy, etc. will affect all of us to varying degrees. How we manage debt, increase our income, and prepare for down times will make all the difference. If we stick to our plan, and reassess where our money is going we can weather the storms that come our way.

By Bryan Mapenzi

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Created by nationally recognized millennial money expert Tonya Rapley, My Fab Finance is a leading financial education and lifestyle blog for millennials who want to become financially free and do more of what they love.