The ‘R’ Word

So, we’re in a recession. Now what?

First off, there’s a few important things to be mindful of. Economic data doesn’t work like apps on your smartphone. It’s always backdated, and never real-time. The data that came out today proves we were in a recession from January 1st, 2022 through June 30th, 2022. The bad news? You’ve been living through a recession. The good news? We may be out of the recession within ninety days when we get this quarter’s data. The other important thing to understand is that all recessions are different. Do not fall for the trap that compares this with other instances, especially when folks try to compare this with what happened during Covid or the 2008 Financial Crisis. There is absolutely zero comparison. Also, while recessions in the 70s and early 80s may rhyme with today’s due to inflation and energy prices, there are still a considerable amount of differences.

The single most important thing to understand today is that recessions take time. And, regardless of how fast or slow our economy exits the recession, this will take a while before we feel good again. Speaking of feelings, it’s crucial that you understand a lot of this will be conducive to how you’re mentally coping and adapting with the negativity that will swarm around you. Yes, there will be hard realities that you cannot control, but through this entire process, it’ll be crucial that you are always moving forward mentally. You must be mindful of your emotions. You’ll likely go through a few of the stages of grief, if not all. The first is denial, and the second is anger. Most everyone is sitting somewhere between these two today. If you’re sadly still in denial, you better do your best to process the reality at hand and move into the anger phase. This is all about moving forward. Don’t get left behind, and don’t keep yourself dragged down. The faster you reach the final stage, acceptance, the better off you’ll be.

It’s paramount that you aren’t too hard on yourself. Regret will soon set in. You’ll think back to some of the trips you took, the lavish purchases you made, and maybe even some of your career decisions. Don’t stress these things. It’s OK. The past is the past. You’re not getting a refund for the big trip you took once lockdowns disappeared. You can’t return the Peloton or pool you dug up in the backyard. And, the new role you have is the best you have at the moment. Don’t beat yourself up over past financial moves. You’ll need a short memory. Bury it and move forward!

Now, the hard reality. You’re likely already in this place anyway due to the rising costs from inflation this year. The monthly budget is tight. There isn’t much in terms of future plans. Investment losses have piled up, and you’ve yet to recoup the money. It may feel that you’re at the bottom of the valley with no way out. You have to persevere here. This too shall pass, and you’ll not be in this state forever! And, that takes us to acceptance. The faster you get yourself here, the better off you’ll be. Come to terms with the fact that we’re in a recession. Accept that this uncomfortable state will last for a while.

America is going to experience low growth for years. We are going to have a labor market that causes angst. You’ll need to maintain a sound financial lifestyle. Budgeting is key at first. Cut the unnecessary purchases. It’s easiest to start with the monthly subscriptions. Then, focus on reducing existing costs. There’s a laundry list of ways. Changing the type of groceries you buy, eating out less, and adjusting how you work out are some of the lowest hanging fruits. Another way to help with budgeting is simplifying purchases to one easy to answer question. Do I want it, or do I need it? That’s all. Ask yourself that each time. Make this a habit. Lastly, continually go back to evaluate the progress of your budget. Ensure costs keep declining, and make sure that you’re still saving something. Each time you review, decrease costs a little more, and increase savings a bit, too.

Work is huge. This is your lifeline. You’ll need to understand that the job market is relatively strong today, but that can change in the coming months. You have to be prepared. Do everything you can to remain in good standing with your current employer. Keep options open by entertaining offers from recruiters, but don’t make any irrational decisions. Stay vigilant. Also, the more even-keeled you can be, the more likely you’ll come out of this successfully. Don’t let a crisis go to waste. There will be ways your calm, rational self can capitalize on the mistakes of irrational decisions made by coworkers. Sit back and wait. You’ll likely be able to incur your best advancement through a time like this if you’re patient and calculated.

Examine all the other financial obligations you have. Is your living situation the most efficient if you are currently renting? Have you tried to renegotiate what you’re currently paying? You may own a home. If so, make sure you have a home warranty. You can’t have something break and disrupt your monthly budget. What about your car? If the car is paid off, make sure the service is up to date and you have a warranty to protect against unexpected repairs. You may be on a loan or lease. Are the terms still ideal? If not, going into the dealer to find a new car to renegotiate the terms of your payments may be a saving grace down the road.

Your savings are important as well. Do your best to avoid dipping into what you have saved. And, consistently try to increase the rate of money you’re saving. Even if it is a few dollars more per week, something is better than nothing. Keep adding to your 401(k), and try to ramp this up as well. Remember, you’re buying shares at heavily reduced levels right now! You want to be contributing as much as you can, especially if your company offers you a match. Lastly, take advantage of the opportunity. Cash shouldn’t sit idly by. First, rates have risen, so if you’re too scared to invest, you can at least seek out higher rates on savings and CDs. The market is deeply discounted today, so an ability to deploy some cash into it will pan out nicely down the road. Don’t become a prisoner of the moment. Hesitation is the enemy.

Lastly, control what you can control. This is going to be your spending, savings, and activities at work. The things out of your control need to be as far out of your mind as possible. Don’t obsess over the negative. Avoid the work gossip. Turn down the news. Keep moving forward, and focus on subtle improvements each day. Prepare yourself for the next economic expansion. The more prepared you are to succeed when the economy begins rising again, the better off you’ll be.

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