So why is a recession brewing?
While we may not be entering Great Recession territory, I and many more believe that we are either headed or already in a recession. According to Forbes, "A recession is a significant decline in economic activity that lasts for months or even years."
Six main factors can trigger a recession, one being an asset bubble like the real estate situation I mentioned above. Other factors can include sudden economic shocks like the COVID-19 crisis, not to mention too much inflation. While our job market has remained strong, the inflation rate has yet to level off, so companies may soon cut back costs, including employees.
Another factor can be excessive debt. James Hill, CEO of the digital media company Black Millionaires, advises us to look for a specific date as an official trigger.
"That date is August 31, 2022, when the student loan repayment extension will be lifted by President Joe Biden. The pausing of these payments is hiding the financial stress that consumers are experiencing, and I don't think analysts or companies are discussing this date enough as an essential metric for consumer financial discretionary spending."
The US needs consumers to feel confident in their spending habits, so the economy can stay up and running.
Call me Chicken Little, if you will, but I am preparing for another recession.
I'm in a completely different place than I was during the last one, from working through my financial trauma to becoming self-employed.
I have experience from navigating the last recession, so knowing what may come has me hunkering down and using the tips below to get myself into a place of financial stability.
So without further ado, here are the ways I'm preparing for a recession:
1. I'm cutting the budget.
I love spending money for fun and as a coping mechanism when I'm stressed. You could tell I was going through it this past March 'cause I was getting an Amazon delivery daily.
This is why I am currently on a shopping ban for the month. I'm not stressed, but seeing where I spend my money is vital to making further adjustments for the rest of the year.
Taylor Kovar from The Money Couple advises people to "Get back to the basics! Spend less than you make, cut unnecessary spending, buy nonperishable items in bulk, sell anything you don't use anymore, and save save save."
One of the critical principles of budgeting is to make sure you have more coming in than going out. Cutting unnecessary spending and selling items you may not use anymore can help make space.
If you're new to budgeting, download a free app like Mint, which helps track your spending and income. You can set up spending categories and get alerts when you've gone over. You can also set up saving goals so that while you may be cutting back in some areas, you can still spend on items that matter to you, like travel or snagging the newest iPhone.
Kovar says cash is king, so get serious about filling that piggy bank! Or if you're like my grandma, the cookie tin under the bed.
2. Communication is gonna be my new name.
I always forget that talking about money is still considered taboo for many people. As a blunt person, I'll ask you questions about your finances that are probably none of my business. I also have to work hard to be empathetic at times.
But that doesn't mean I won't openly share about my own, and I'm doing it now more than ever. I told my friends point blank that I'm living lean now and expect to do so until the end of the year. This way, it's nothing personal when I decline a future outing.
You don't have to give your friends numbers, but maybe, you want to communicate why you're staying low at home. You can also suggest creative, low-cost outings to avoid missing out on friend time.
3. My to-do list consists of updating my portfolio.
There is a ton to write about in the personal finance community. Still, I've been trying to seek clients who offer subject matter that I usually don't cover. I may be writing an entire book on budgeting at the moment (yes, my book comes out in April! With a real publisher!), but I'm still looking to diversify my portfolio.
I'm looking at taking online courses, have a stack of books I'm working through, and taking time to network via LinkedIn.
"Employers are desperate for qualified talent, so picking up marketable skills and demonstrating your experience on a résumé make you ripe for getting a pay raise at the competitive labor market's expense," says Riley Adams, a licensed CPA who works as a senior financial analyst at Google and owns Young and the Invested.
There are a variety of ways to gain new skills. You can take an online course, sign up for a free certificate program, or even ask your employer to pay for it.
"Depending on your employer's policies, the IRS allows up to $5,250 per year for employers to pay for educational and job training expenses for employees without the employee taking a tax hit," Adams says.
4. I'm making sure my side gigs align with my passions so I'll actually, you know, want to do them.
I've been a hustler for as long as I can remember. I've done everything from babysitting and dog walking to selling my school lunches and cigarettes when I was homeless in high school.
Now that I'm writing full-time, I still do an occasional side gig and serve as a community liaison for a personal finance conference. I'm telling you, the Jay-Z song "I Just Wanna Love U" was written for me.
Topping up your income is crucial in a recession, so if you don't already, now is the time to get another source of income. Bobby Warren, the founder of Wooster Media Group, advises you to find a side gig that aligns with your passions.
"I like to have multiple streams of income. I have my SEO business, which is my primary source of revenue, but I also have an affiliate marketing website. I sell a content optimization course on Gumroad, and I have an online store that sells T-shirts and other apparel related to my affiliate website."
You don't have to be an SEO guru like Bobby to find a side gig that works for you. Take time to sit down with yourself and list things you like to do, then go from there. If you like shopping, look into Instacart or Shipt. If you're a social person and enjoy driving, check out Uber. Consider checking out freelance writing or designing T-shirts to sell on Redbubble and Amazon.
5. Building my resilience is more important than ever.
As part of my ongoing journey to heal my PTSD, I'm always looking for ways to build my resilience. Building my resilience helps me navigate stressful situations that can throw me off track, especially financially.
That's not to say I don't have feelings like everyone else and won't have a nervous breakdown for a minute. But it does mean that said breakdowns may only last five minutes compared to a whole day like they used to. Shoutout to my therapist!
6. I'm busy being my woo woo self.
The corniest part of my recession preparation is ensuring I take time to be grateful. I am in a place where I can pay my bills and save money for a rainy day. I have a reliable car and a great home office where this article is being written.
This doesn't mean I don't acknowledge situations when they are shit. Some problems are just that, shit. I don't know why certain things happen or why I've had to experience life differently than others. But when I'm grateful for what I have, I find that more opportunities present themselves that I can take advantage of.