Not Your Grandparents’ Recession: 3 Tips for Thriving in an Uncertain Economy
No matter how the pundits and financial forecasters label it — downturn, economic recession, or otherwise — there is no question that 2023 is going to be a rough year for many people’s financial health. In fact, it is highly likely that the next several years will be difficult, as officials and legislators work to correct course and spur recovery. What does that mean for you? It means taking measures to protect yourself in an uncertain economy.
It is possible to weather an economic downturn if you are wise with your decision-making and take a strategic approach to prepare and protect your finances. The following tips can help you mitigate some of the negative impacts a volatile economy can have on your retirement, your investments, and your overall quality of life.
Here are some tips to help you along the way.
1. Don’t Give Up Revenue Streams in Uncertain Times
When the economy begins to falter, it is vital that you continue to generate revenue to help buffer your savings against the increases in your cost of living. Inflation has stayed above 6% for the last two years, spiking the cost of goods and services. Supply chain shortages have also created price increases for the majority of products consumers purchase, including groceries.
Gas prices may have dropped in recent months, but the impact of the spike has already done its fair share of damage. Home prices have not fallen in most major cities, new builds are more costly due to supply, labor shortages and even used vehicles have become more expensive due to low inventory and high demand.
Any one of these increases might be manageable on their own, but when they begin to snowball, they chip away at the amount you can save and invest. If you are already retired, these expenses can steal literal years from your future.
It all comes down to this: the more money you make through the recession, the greater the chance you can bounce back when the economy inevitably recovers. So if you have rental properties, a side gig, a part-time job, conservative investments with reliable returns, or any other form of income, now is not the time to quit. Hang on to those revenue streams as much as possible.
2. Pay Down or Remove Debt
While you’re holding on tight to your incoming cash, it’s also important to examine your expenditures. More specifically, you should take a long, honest look at your debt. We tend to rack up debt when the economy is good and our careers are thriving. The thought process is that if you can manage the monthly payments, everything will be fine. The challenge lies in maintaining those monthly payments when the economy is bad, your job is laying off employees, and every single item you need to purchase to survive is more expensive.
When the economy is struggling, debt can become an anchor that holds you in place when you need fluidity the most. If you have a large amount of outstanding debt, paying it off now can give you more room to breathe if something terrible, like losing your job or experiencing a medical emergency, happens. In some cases, that may mean making tough decisions.
You may need to sell that boat that still has a large balance or downsize to a smaller, more affordable car. Think of it this way: Do you want to sell these items now, while there is still a chance to recoup some or all of your investment, or would you prefer to wait until the economy is so stagnant that no one will be able to buy them? Smart financial planning gives you the gift of flexibility by removing the shackles of debtors sooner rather than later.
3. Don’t Assume You Know What Will Happen Next
When we say, “this ain’t your grandparents’ recession,” it’s important to remember that their recession wasn’t the same as the generations that preceded them, either. Every downturn, every recession, has different factors that generate the resulting economic hardships.
You cannot react to 2023 as you did in 2008 because the circumstances that have caused the current crisis are wholly different. For example, the burst housing bubble that spurred the 2008 recession led to incredibly low real estate prices. In 2023, though, while real estate prices have lowered slightly because of higher interest rates, no such bargain-basement prices exist.
In order to thrive through the coming months, it is important to observe all aspects of your financial portfolio through the lens of right now.
Ask yourself questions like:
- What is this specific economy doing?
- What factors are driving consumers, politicians, and other key decision-makers to make decisions in 2023?
- How are you managing your 401k with the latest market fluctuations?
- Is your debt at a manageable level if the economy continues to deteriorate?
In addition to observing the world around you, you should also be ensuring that you are managing your money for the current crisis, not how you handled it in the 1990s, the 2000s or even 2022.
The economy may be faltering, but that does not have to mean that you will. Think strategically and work proactively to protect yourself for the hardship ahead and you will thrive in these uncertain times.
Want more advice about wealth management and financial planning during an economic crisis? Call today and schedule a consultation with one of our experienced advisors. Together, we can craft a plan to help you break free from uncertainty and gain the freedom to live the life you really want.