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Major Slowdown in Economy Points Towards a Recession
While retail payments surged 11% so far this year to nearly $4 trillion, that increase obscures a slowdown that began in recent weeks: November spending rose just 5%, Bank of America’s CEO Brian Moynihan said.
Even Wells Fargo CEO Charlie Scharf is saying, “there is a slowdown happening, there is no question about it. We are expecting a fairly weak economy throughout the entire year.”
American consumers are tapping the brakes on spending as the Federal Reserve’s interest rate increases reverberate throughout the economy, according to the CEOs of two of the largest American banks.
After two years of pandemic-fueled, double-digit growth in Bank of America card volume, the rate of growth is slowing.
Still, the downturn isn’t being felt equally across all retail customers and businesses, Wells Fargo’s CEO said.
Both Wells Fargo and Bank of America CEOs expect a recession by Q1 of 2023 and expect some sort of light at the end of the tunnel by Q4.
The implications of a recession end up affecting majority of the U.S. economy as corporations and businesses struggle to yield market capital in slow-growth conditions.
Wages are affected, unemployment skyrockets, and the banks get left with massive debt when Americans can no longer afford to pay their credit card bills or mortgages.
Do you think we will officially enter a recession in the beginning of 2023?
Day trading uses one of the biggest leveraging tools out there, the stock market/derivatives market.
Here, traders will require intense discipline in order to execute their trades with profit.
Day trading is certainly not for everyone, but if making hundreds of dollars to thousands of dollars per day sounds appealing, you can learn more about it here.
The incredible thing about trading the market is that traders can learn how to make money whether the stock market is booming or crashing.
This means that as long as you’re able to develop the skills necessary to become a consistently profitable trader, you will be able to pivot in a recession and actually make money while most of the economy faces turmoil.
Going on the offense means learning new skills and getting out of your comfort zone to be successful at something outside your 9-5.
It is never too early to begin preparing for an economic downturn. What you do today can save you tomorrow. If you weren’t prepared for the coronavirus disruption be sure to also share this with a loved one. Here’s how to better prepare yourself for the next recession.
Pay Off Big Debt
One way to better prepare yourself for the next recession is to pay off big debt. Paying off debt will reduce the amount of monthly payments you have which will result in having more funds available to save or invest.
Paying off debt also lifts the weight off your shoulders knowing you don’t owe any parties anything. Pay off your vehicle or any open credit cards. If you have a lot of debt find out what strategy we suggest using when it comes down to paying thousands in debt here.
Have An Emergency Fund
Having an emergency fund is one of the single most effective ways to better prepare yourself for the next recession. Think of your emergency fund as a net from which you can fall on should things disrupt your plans. Recessions can lead to several hardships including the loss of a job or business. Having an emergency fund allows you to have access to capital in the event that the worse case scenario occurs in your financial world.
If you’re stuck on exactly how to create an emergency fund read about how to start ithere. Franknez.com walks you through on creating a goal and then having your savings work for you so that your money multiplies through compound interest.
Our mission is to provide our readers with real world experience and advice to help further their financial knowledge and secure their financial future.
Live Below Your Means
A great suggestions as to how you can better prepare yourself for the next recession is to live below your means. So what exactly does it mean to live below your means?
To live below your means is to live significantly below the threshold of your annual income.
Living below your means allows you to have financial breathing room. As a result, you’re able to save more money and increase the amount dedicated to your emergency fund. Here are some ways on how you can live below your means:
Downsize your home if you don’t need the ‘excess’ space.
The new vehicle can wait (practice delayed gratification)
Don’t over-indulge in jewelry or high fashion clothing (there’s a time for it)
Have less takeout (keep it in moderation – set a budget)
Resist the new gadgets – make due with the current (for now)
When you live below your means you essentially grant yourself access to manageable monetary means. Prepare yourself for the next recession by eliminating the stress of going paycheck to paycheck.
Budgeting in general is a great winner habit to have. Budgeting long-term will help you achieve your savings goals and keep you living below your means. A great way to keep track of your expenses is to frequently log in to your bank account(s) and build awareness of where your money is going. We also suggest downloading the app MINT by Intuit. It tracks down your expenses and keeps record of all your accounts. It makes it super easy to keep quick tabs on your accounts.
Don’t Depend On One Source Of Income
What occurs when you depend on one source of income and then all of a sudden it’s completely gone or cut in half? This is what happened to 22 million Americans who filed for unemployment during the coronavirus pandemic.
Learn to better prepare yourself for the next recession by acquiring additional skills and knowledge and learn how to create more than one source of discretionary income. Franknez.com has posts on how to start an online business and grow it, how to earn passive income, how to start a blog, side hustle ideas & so much more. Be sure to subscribe to our newsletter to be notified when new posts are published!
Prepare yourself for the next recession by generating income from a variety of sources.
Tip: By acquiring multiple sources of income you ensure yourself financial growth and financial security.
Develop A High Income Skill
What does it mean to develop a high income skill? This means earning a promotion, developing skills to attract higher paying opportunities, selling more, or becoming involved in anything that will increase your current income.
By increasing your income you gain monetary means to pay off debt and save money for a rainy day. This is a great way to prepare yourself for another worse case scenario such as a disastrous recession. If it becomes too difficult to develop multiple sources of income or it’s not within your time limitations to do so, developing a high income skill can certainly be a great way to compensate.
Tip: Do not spend more as you earn more.
Be sure you continue to live below your means as you increase your income. You will have breathing room and gain the confidence to face any financial challenge that comes your way. If you find yourself in need of motivation we suggest reading 10X by Grant Cardone. This book discusses how you can increase your income and meet your goals by essentially putting in 10X amount of effort in everything you do. Grab the book here.
Choose Your Industry Well
One way you can better prepare yourself for the next recession is to choose your industry well. Take a look at the industries that thrived during the coronavirus pandemic vs the ones that didn’t. This is a sure way to identify which sectors are a ‘safer’ career choice.
Industries that thrive during recessions include:
Courier / Freight
Become recession proof by choosing a great career that won’t die down during an economic distress.
Increase Your Credit Score
The people who are getting approved for 0% APR credit cards and for home loans are those with a great credit scores. Keep in mind, recessions are also the time to learn how to identify new opportunities. Qualifying for an affordable home while the market is low could be your time to make that move; it might not. Perhaps a 0% APR credit card can help eliminate other credit card debt and help you further your personal finances. A high credit score opens opportunity, even during a recession. Start building your credit now; your future self will thank you.
Another tip on how to better prepare yourself for the next recession is to diversify your investments. Don’t keep all your eggs in one basket. Franknez.com has posts on how to earn interest from a high yielding savings or money market account, how start an online business, and how to invest in the stock market step by step!
Diversify your investments by allowing your money to work for you in a variety of ways without you having to put up with much maintenance. This strategy will require you to take some personal risks though it isn’t as scary as it actually sounds! Risk plays a big part in securing your financial future. Prepare yourself for the next recession by learning this important wealth building skill.
Here are some ways you can prepare for a recession by diversifying your income:
Move money into a market or high yielding savings account
Build a portfolio with index funds and ETFs (stocks)
Learn to identify people of value who can play an important role in your life when it comes to health, career, finances, mentorship, and partnerships. It is important to build relationships with people in these categories because they become connections. These links of relationships are known as a network.
Better prepare yourself for the next recession by building a strong network as it can prove useful during the times of hardships. If you lose your job you might know someone you networked with who might be able to help. Whether its recommending you to an employer or even going to the greater lengths of personally hiring you, networking opens opportunities.
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We are super excited to share these amazing tips to keep you grounded during hard times. Kudos to you for looking out for yourself. Here’s how to stay afloat during a recession.
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Cut unnecessary expenses such as subscriptions and streaming services (e.g. Disney Plus, Netflix, Hulu, etc.)
Avoid eating out – includes takeout
Use coupons to your advantage for discounts on your groceries and other necessary household items. By momentarily cutting off subscriptions and streaming services, you give yourself more breathing room. Avoid eating out as it tends to cost more money than cooking at home. Some restaurants or delivery services might offer free delivery at the moment but they are in the same situation during a recession. Take care of yourself first.
Build Your Emergency Fund
Put money in a high-yielding savings or money market account to earn you interest.
Stack some of your earnings in a personal savings account as liquid money.
By putting money into a high-yielding savings or money market account, your money gets to work for you. Compound interest will begin to accumulate and earn you money every month whether or not you keep depositing earnings. Tip: The more you deposit, the more your return is.
It is important that you keep stacking your money for your necessities. Move money into your personal savings account to keep as liquid money, or money you can pull out within a matter of seconds in case of an emergency. It usually takes 3 business days for earnings to come in from a money market account so it would be wise to keep some cash at hand in a personal savings account.
Live Below Your Means
Hold off on any moving plans, stay put
Avoid liabilities such as a new car / new home
Rethink your current standard of living
If you were planning on upgrading your standard of living this year you might want to hold off on those plans. Stay put, chances are your rent or mortgage is currently lower than where you want to go.
Avoid liabilitiesaltogether. This means the new vehicle, the new home, the new tuition, etc. It is important to stay out of debt during a recession. Liabilities require you to take money out of your pocket and prohibit you from saving and investing it.
Rethink your current standard of living. If you’re able to momentarily downsize then you’re in a great situation, do it to reduce your costs on rent and utilities. Another great tip is to work together with people you trust and split the cost of rent in order to live adequately to cut back expenses and continue to save money.
Use Gift Cards During A Recession
Gift cards are an amazing way to treat yourself for free. Most people tend to use gift cards when the economy is booming and everything is great. If you’re like us, you probably have a few saved. Perhaps you just never got around to using them or have a little sense of self control most don’t.
Gift cards are great during a recession because it allows you to make a purchase without taking money out from your wallet. You’ll never get to appreciate them the same again.
Recycle / Cash In Change
Recycling is a great way to keep you afloat during a recession. You’re essentially getting cash back on all your recyclables. Plus, it’s great for our environment; let’s not forget that. Although recycling money may not be a lot, it is certainly a good way to earn $10-$20 every month.
Cashing in loose change is also a great way of gathering money that’s been collecting dust. If you’ve already been filling up the piggy bank now is a great time cash it in.
Work Temp For An Essential Company
Essential companies seem to be the only places hiring during our current coronavirus pandemic situation. Although we are currently facing this issue, it is unlikely we will be coming across this challenge for every recession.
Take precautions, but see what is hiring and how it may convenience you. Go where the money is and keep stacking your money.
Develop An Extra Source Of Income
Developing an extra source of income is one of the best ways to keep you afloat during a recession. There are many ways people are earning money online by working from home. Find your side hustle! Read: “Ways You Can Earn Money During The Coronavirus Lockdown” to see how you can begin making money on the side and from home.
An extra source of income will help pay for your necessities or allow you to put extra cash away into your money market account or personal savings account.
Sell items that you don’t use anymore to keep you afloat during a recession. This strategy is a quick way to put cash in your pocket.
Consider selling (old, extra, or unused):
MP3s / iPods
Cellphones / Smartphones
Blu-ray, DVDs, Headphones, Televisions
Gaming consoles / Games / Movies
Books / Board Games / Magazines
You can sell on Facebook market, eBay, Amazon, Craigslist, etc.
It would be wise to make transportation arrangements in order to cut back on fuel expenses and avoid unforeseen car repairs. If you work locally perhaps it would be best to bike to work. Maybe your work is a few blocks away, walking is another alternative. If your work is cities away carpool with someone one week and alternate driving.
Use A 0% APR Credit Card
We don’t usually condone the use of a credit card but there are times where they become handy, especially when used responsibly. We suggest using a credit card with 0% interest in the event that there are no savings in your account. The 0% APR will help you pay off the credit card without any additional interest per the providers agreement. Do your research to see which cards fit your needs during a recession.
Here are other benefits to using a 0% APR credit card:
Payoff other credit card debt
Apply payments to principle on loans eliminating accruing interest
Most 0% APR credit cards have terms up to a year
Qualifying for one of these bad boys requires you to have great credit score so make sure you keep track of yours.
This strategy is last on our list as it is only suggested as a last resort. The government has currently signed off a stimulus package that allows you to withdraw from your 401k without any fees. Although this is only temporary, it is certainly an option in order to keep you afloat during a recession. We recommend keeping a portion of these earnings in a money market account to earn you interest while it’s out of your 401k.