Tips to prepare for an economic downturn

New York. Gasoline, food and rent prices are rising. The US Federal Reserve raised interest rates to the highest level since 2018.

The US economy has shrunk for two straight quarters and experts are divided on expectations of a possible recession. What is clear is that economic uncertainty will not end soon. However, there are some steps you can take beforehand if we find ourselves in a more difficult financial situation.

The question about a recession is not whether or not it will happen, but when it will happen, says Yiming Ma, a professor at Columbia University. He said people should be prepared, but not panic.

“Historically, the economy has always gone up and down,” Ma said. “It’s something that just happens, it’s like getting the flu.”

He added that some people’s immune systems allow them to recover faster than others.

If you think an economic recession could destabilize your finances, here are some preventative steps you can take.

Measure your expenses and create a budget

Knowing how much you spend each week is key. Ma recommends sitting down and writing down (or writing) how much you spend each day. This will help you know your income and payments, and you will be able to identify unnecessary expenses.

The Federal Financial Education Program Money Smart also recommends this first step.

Ideally, set a budget that covers your basic needs for 3 to 6 months. (file, archive)

“By understanding how much money you have and how much money you spend, it is possible that you can implement changes that will help you through tough times.”the government agency recommends.

Once you set the budget, you will be able to determine where you are spending the most. An additional advantage is that you will be able to identify and delete unnecessary expenses in order to create a savings plan.

If it’s hard for you to make a budget, there are guides like How to create a budget Bank of America or Simple guide to budgeting From the Accion Opportunity Fund that can help you.

Save when you can

Although having an emergency fund to pay for basic needs is ideal, the truth is that many people can’t afford to save every two weeks. The more unnecessary expenses you can cut, the more you can save. Ideally, create a budget that covers your basic needs for 3 to 6 months, said Jane Natalie, co-founder of Troutwood, an app that helps people create financial plans.

Programs like America saves (Available in English only), the nonprofit campaign of the Consumers Federation of America, helps you create a plan to organize your money.

If you have a savings account at the bank, it is important to check if your bank gives you a good interest rateMa said.

“It pays to know what other banks offer so that you know where to keep your savings, rather than leaving it in the bank they have been in for the past 20 years,” he said.

Ma’s recommendation is to consider monthly and service charges that can lower the amount of your savings. But don’t limit your options, because online banks sometimes offer better rates than traditional banks.

Even when you're trying to save, there are times when your salary doesn't cover your basic needs.
Even when you’re trying to save, there are times when your salary doesn’t cover your basic needs. (News agency)
Collect your loans and don’t take any more

As the interest rate rises, experts recommend consolidating your loans so that you have debt at a fixed interest rate. If possible, pay as much as possible to save money in the future.

“Job stability tends to be worse when there is a recession (and) not the time to accumulate debt,” Ma said.

Since debt can be difficult to pay off, there are guides to help you make a plan. It is with the guide on how to get out of debt from the Federal Trade Commission.

When inflation is rising, it’s not a good time to get new loans to pay for big expenses like buying a new car. However, experts recommend that it is best to buy appliances such as vacuum cleaners, stoves, mowers, or any other permanent device as soon as possible to avoid increasing their prices in the future.

Visit thrift stores

Allen Gillon, who works as a caregiver in California, has been affected for months by soaring prices for household products like groceries, kitchen towels and gasoline.

His son’s favorite juice Hi-C Orange was $1.99 for six packs and is now $2.50. Since the beginning of the COVID-19 pandemic, when Galeon stopped working with multiple families and stayed with only one family to reduce the risk of illness, his family has faced financial instability.

One of Gelon’s actions has been to buy clothes and electronics from thrift stores, whether it’s through Goodwill, pawnshops, or Craigslist.

Between worrying about paying your bills or not knowing what's going to happen with your financial future, your stress levels can soar.
Between worrying about paying your bills or not knowing what’s going to happen with your financial future, your stress levels can soar. (stock struggle)
Negotiate monthly receipts

Since the start of the pandemic, many companies have updated their support policies and become more flexible with their customers, said Kia McAllister Young, America Saves director.

Calling your monthly service providers to negotiate your bills, whether it’s utilities, the phone, or your internet company, can help you pay less.McAllister Young said. He added that people can ask for the best rates and available discounts or vouchers that can help them reduce the monthly amount.

“If you tell them ‘I’m thinking of switching companies,’ it helps let them know that you are considering not continuing with their services and they can give you the best rate. The goal now is to save as much as possible,” McAllister Young said.

Federal programs like the Low-Income Home Energy Assistance Program help you lower your utility bills, or Lifeline, and help you pay your phone bill. If you are not sure if you qualify for a federal or state program, you can call 211, where you will be connected to local professionals who can help you find the right program.

Save in your store

Visiting the supermarket with a list of dishes, buying generic brand products or buying in bulk are some of the recommendations of the US Consumers Association.

“A lot of stores offer you price comparisons, if you show them that their competitors have the same product at a lower price, they will match the price,” McAllister Young said. “You should also look at the stores near your home, so you can save on gas.”

Learn about government government assistance programs

Even when you’re trying to save, there are times when your salary doesn’t cover your basic needs. If you find yourself in this situation, there are programs around the country that can help.

“Sometimes there isn’t enough money at the end of the month,” said Michael Best, an attorney at the National Consumer Law Center who works on financial services cases.

To use this help, check if you qualify for programs like Rental Assistance ProgramAnd the Food Stamp ProgramAnd the Farmers Market Feeding Program or the homeowner assistance fund. All of these federal programs are coordinated by their states. Some countries provide additional assistance.

Find help in your community

If you find yourself in a situation where you cannot afford food or housing, find assistance programs from nonprofit organizations around you. From helping to find housing, food banks, or helping to pay your utility fees, these NGOs can help. National organizations such as Feeding America have food banks in the United States.

“We see that the community is not asking for more help because of the economic situation in the country,” said Kavita Mehra of Sakhi Women of South Asia, an organization that provides assistance to domestic violence survivors in New York.

Your organization provides housing, food, and financial assistance to people in your community. From January to June, his organization distributed more than $150,000 in financial aid to survivors in need. So far this year, the organization has exceeded the amount of resources it provided to the community in 2021.

Take care of your mental health

Between worrying about paying your bills or not knowing what’s going to happen with your financial future, your stress levels can soar.

“It’s a messy existence,” Galleon said. “You have to organize yourself well and remain calm to take care of your mental health.”

Debra Kesen, clinical director of the Light On Anxiety CBT Therapy Center, recommends that you first learn to recognize when your body is under stress. In addition, she recommends doing relaxation exercises such as breathing or touching a wall to calm stress, or doing five-sensory exercises to relieve anxiety.

Most health insurance covers some form of mental health support. If you do not have health insurance, you can look for therapists who offer reasonable rates.

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