How to recession proof your life in times of economic uncertainty

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Vanessa Correa, left, and Gigi Fiske, right, distribute gallons of milk during a food giveaway hosted by the Farm Share food bank, Wednesday, July 20, 2022, in Miami. Long lines are back at food banks across the United States as American workers overwhelmed by inflation turn to donations to help feed their families. (AP Photo/Lynne Sladky)

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Gasoline, food and rent prices are skyrocketing. The Federal Reserve raised interest rates to the highest level since 2018. The US economy has contracted for two straight quarters.

Economists are divided on whether a recession is looming. What is clear is that economic uncertainty is not going away anytime soon. But there are steps you can take now to be ready for whatever lies ahead.

Yiming Ma, an assistant professor at Columbia University, says it’s not a question of if but when a recession will occur. People need to prepare but not panic, she said.

“Historically, the economy has always had its ups and downs,” Ma said. “It’s something that happens, it’s a bit like catching a cold.”

But, she notes, some people’s immune systems are better able to recover than others. It’s the same with finances. If you think a recession could destabilize yours, here are some things you can do to prepare.

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KNOW YOUR EXPENSES AND MAKE A BUDGET

Knowing how much you spend each month is essential. Ma recommends sitting down and writing down how much you spend day to day. This will help you see what’s coming in, what’s going out, and what unnecessary expenses you could cut.

“By understanding the money you receive and what you spend, you may be able to make changes to help you through tough times,” advises the Federal Deposit Insurance Corporation’s Money Smart, a financial education program.

Budgets often reveal expenses that can be eliminated entirely or impulse expenses that can be avoided through planning.

To guide you through creating a budget, free courses such as “Create a Budget (and Stick to It)” by CT Dollars and Sense, a partnership of Connecticut state agencies, and the Budget Calculator of Nerd Wallet can be good starting points.

SAVE WHILE YOU CAN

The more you can reduce non-essential expenses, the more you can save.

It’s not possible for everyone, but Gene Natali, co-founder of Troutwood, an app that helps people create financial plans, says budgeting is ideal to save enough to cover basic necessities. for three to six months.

Programs such as America Saves, a nonprofit campaign of the Consumer Federation of America, can help create a roadmap.

And if you have a savings account, it’s important to check if your bank offers you a good interest rate and shop around if not, Ma said.

His advice is to keep an eye out for monthly fees or service charges that could eat into your savings. But don’t limit your options. Online banks sometimes offer better rates than traditional banks.

CONSOLIDATE YOUR LOANS, AND TAKE NO MORE

As interest rates rise, experts recommend consolidating your loans into one fixed-rate loan and, if you can, paying off as much of your debt as possible.

“Job security tends to be worse when a recession hits, it’s not a good time to rack up debt,” Ma said.

But paying off your existing debt is easier said than done. The Federal Trade Commission’s consumer advice guide to getting out of debt can help you develop a plan.

With high interest rates, now is also not the best time to take out new loans for big expenses like cars, although experts recommend that if you need durable goods like vacuum cleaners, stoves or dishwashers, you buy them as soon as possible to avoid future price increases.

VISIT SECOND-HAND STORES AND GARAGE SALES

Allen Galeon, an at-home caregiver in California, has been affected for months by rising prices for basics like groceries, paper towels and gas for commuting.

Her son’s favorite Hi-C orange juice, which used to cost $1.99 for a six-pack, is now $2.50.

Since the start of the pandemic, when Galeon stopped caring for multiple single-client families to reduce her health risks, her household has faced financial instability.

One of the choices he’s made is to buy second-hand items like clothes or electronics whenever possible, whether it’s from Goodwill, pawnshops or Craigslist. And Craigslist lets you search by area, cut down on driving — which means less gas and hassle.

NEGOTIATE YOUR MONTHLY BILLS

Since the pandemic, many companies have updated their relief policies and become more flexible with users, according to Kia McCallister-Young, director of America Saves.

Calling monthly service providers to negotiate bills — whether it’s utility, phone, cable, Internet or car insurance — can lead to significant savings, McCallister-Young said. Individuals can ask for the best rate, any available discounts, rebates or coupons may result in a reduction in the monthly fee. If a supplier competes with other businesses, there’s an even greater chance of getting a discount, she added.

“If you tell them, ‘I’m thinking of changing’ or shop around, that helps; if they know you’re planning to leave, they’ll give you the best rate, and the goal right now is to find as much cash as possible,” she said.

Check out federal programs such as the Low-Income Home Energy Assistance Program, which helps cover bills, and Lifeline, which can help pay phone bills. If you are unsure whether you qualify for a federal or state program, you can call 211, which will connect you with a local specialist who can help you.

CHANGE YOUR GROCERY

Grocery shopping with a meal plan, buying generic rather than branded products, or buying in bulk are some of the Consumer Federation of America’s recommendations.

“A lot of stores have price matches, so if you show them a competitor is selling the same product at a lower price, they’ll match that,” McCallister-Young said. “You also want to look at the stores closest to you, so you don’t spend the extra money you would save on gas.”

Another way to save money on groceries is to check out food-sharing apps like Olio, which connects people in their community to share extra grocery items, and Too Good to Go, where customers can buy surplus food from companies at reduced prices.

SEE GOVERNMENT ASSISTANCE PROGRAMS

Even with these saving and spending practices, a month’s salary isn’t always enough to cover major expenses. If this is your case, programs across the country are available to help you.

“Sometimes there just aren’t enough ‘month-ends’ at the end of the month,” said Michael Best, an attorney at the National Consumer Law Center who works on financial services issues.

To use these resources, check to see if you qualify for the Emergency Rental Assistance Program, Supplemental Nutrition Assistance Program, Farmers Market Nutrition Program, or Homeowners Assistance Fund. All of these programs are federal programs coordinated by state governments. Some states offer additional local programs for their residents.

SEEK COMMUNITY HELP

If you are food or housing insecure, look for nonprofits or community organizations near you. From housing assistance and food banks to help with utilities, nonprofits across the country can help. National organizations such as Feeding America host food banks in all 50 states.

“We are already seeing the community contacting us in overwhelming numbers because of what is happening in the country in terms of economic stability,” said Kavita Mehra of Sakhi for South Asian Women, an organization that helps victims of domestic violence in New York. York. .

His organization provides housing, food and emergency cash assistance to people in the community. She said that between January and June, her group distributed more than $150,000 in emergency cash assistance to survivors who struggled to keep the lights on and put food on the table. That’s more than all of last year.

Food aid organizations such as Ample Harvest, Hunger Free America, and Food Rescue US offer maps that allow users to find a nearby food bank by typing in their zip code.

TAKE CARE OF YOUR MENTAL HEALTH

Between worrying about bills and not knowing what your financial future might look like, your stress levels can explode.

“It’s a hectic existence,” Galeon said. “You have to do a lot of management and you have to keep a cool head, for the sake of your sanity.”

Debra Kissen, clinical director of the Light On Anxiety CBT Treatment Center, recommends first recognizing when your body is stressed. Next, she advises mindfulness exercises such as breathing, touching a wall to calm down, and performing the “five senses to relieve anxiety” exercise.

Most health insurance covers some type of mental health assistance. If you don’t have health insurance, you can search for sliding scale therapists nationwide, including through FindTreatment.gov and the Anxiety and Depression Association of America directory.

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The Associated Press receives support from the Charles Schwab Foundation for educational and explanatory reports aimed at improving financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

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