Recession worries have deepened as the economy posts two consecutive quarters of declining gross domestic product numbers. We advise our clients to pay attention to what happened during previous economic downturns, but also keep in mind how this one could be different…if it does happen. While we can all learn lessons from previous economic cycles, we also need to remain aware that every recession or the potential of one bring forth different and new challenges.
Supply chain problems are at the forefront of many business owners minds, but we also need to account for inflation, rising interest rates, and unemployment rates. With all of these factors in mind it is believed the condition will lead to a gradual form of a recession. Meanwhile, according to a survey from digital wealth manager, Personal Capital, fewer than half of Americans feel “financially secure enough” for another recession.
Top fears include not being able to plan for the future, the inability to pay bills, and/or losing a job. While the average emergency savings is roughly $7,600 many individuals have no savings and if they do have this average amount it still may not be enough. Typically we advise saving for three to six months of living expenses; however, to allow for added flexibility it would be wise to save for six to nine months of living expenses.
Nonetheless, we are NOT currently in a recession and some factors, like the job market, say we may not be looking at a recession anyway. Until the National Bureau of Economic Research decides, we will not be considered in a recession. Federal Reserve Chairman, Jerome Powell, recently stated he believes the central bank’s rate increase will tame inflation and he does not see a recession happening.
We cannot predict if a recession will happen, but we do advise to focus on what you can control when it involves saving and spending. Establish a new budget to include savings, downsize if you are able to be more frugal, and stay invested while paying down debts. It can also be helpful to keep your resume up-to-date if loss of job is something you fear.
TK Accounting & Consulting 