The financial markets are reflecting the risk that an economic recession is coming to the U.S. The rise in COVID-19 cases is creating both supply and demand shocks throughout the economy. In particular, social distancing is slowing consumer spending, which has been the strongest part of the economy over the past year. In fact, consumer spending contributed 1.76 percentage points of the 2.33% in GDP growth in 2019. A decline in consumer spending raises the risk of recession.
While many people can — and do — make it through recessions with little impact, recessions can be difficult to overcome. It’s important to remain proactive in the face of a potential recession and take adequate steps to properly prepare for one. Here are five tips to make living through a recession more manageable:
- Recession-proof your career. While a recession tends to bring layoffs, boosting your skills and increasing your value in your current role may help you escape widespread cuts. Scaling up your skills and experience can also make you more marketable to employers if you do need to find another job. Finally, pay close attention to your company’s financial performance — if it’s consistently missing business goals, cutting benefits or hours and laying off employees, consider looking for another job at a company that has more stability.
- Create alternative income sources. Sometimes, working a side hustle can be a big help during a recession since it allows you to bring in extra money when you need it the most. Even if your alternative income sources, such as driving for a rideshare service or renting out an extra bedroom, don’t bring in large amounts of cash, some extra income is always better than none.
- Increase emergency savings by optimizing spending habits. It’s crucial to build an emergency savings fund in any situation, but especially if you’re afraid that you’ll lose your job in a recession. While it can be difficult to find extra money to put away, there are some tools that can help. For example, refinancing your home loan to get a lower interest rate could help lower your monthly mortgage payments and sock away the monthly savings for emergencies. Beyond that, save money by keeping a close eye on your finances and avoiding unnecessary spending, such as eating out or making big purchases.
- Tap government programs if needed. From unemployment benefits to the U.S. Department of Agriculture’s Supplemental Nutrition Assistance Program, or SNAP, the government has numerous programs designed to help you get back on your feet if you’re hit hard during a recession. Check your local and state government websites regularly, as well as news reports, for additional programs that may be announced specifically in response to COVID-19.
- Don’t panic, and be smart. While talk of a recession can be scary, it’s important not to let it control your life. Every recession that has hit the U.S. has eventually ended. Stay level-headed and financially responsible.