With increasing gas prices, seeing inflation every day at the grocery store, coming off a 2 year long and counting world pandemic, and hearing new updates daily of a war going on overseas, can often make anyone question the market and ask the question of, “Am I going to be, okay?”

The talk of “a possible recession” can also make even the most laid-back person a bit nervous about their finances, and put someone in a panic attack if they are tight on cash to begin with. Unfortunately, no one can predict the future, and that crystal ball is still broke telling us when the next recession will hit. But the reality is, there will always be the chance of a recession at any given time, whether it will be in a few months, next year, or even five years from now, there is no certain timeframe to confirm when it will be.

What should I do, when I don’t know what to do in this situation?

The most important thing you can do for yourself right now, and at any moment in time for that matter, is to take a deep breath, collect your thoughts, and create a well-informed plan. Don’t go into freak out mode. Focus on the things that you can control.

Here are a few things you can do to make sure you are setting yourself in a good financial situation if we were to go into a recession. You could call this a “things you can control” checklist…

Your Emergency Fund

Like Dave Ramsey, we at Whitaker-Myers Wealth Managers suggest an emergency fund that will cover your monthly expenses for 3-6 months. Obviously, that is a broad range and can drastically impact your savings, but it is more dependent on your situation and your comfort level. The suggestion of a 3-month emergency fund vs. a 6-month emergency fund has several factors that come into play, mainly coming down to are you a single or dual income household? If you are a single income household, we suggest trying to save more of that 6-month range, as it gives you more of a cushion since there is not another income to help support you or your family. If you are a dual income household, more than likely both breadwinners will not lose their jobs, or be laid off at the same time, so a 3-month emergency fund is suggested.

However, if the current world and economic situations are worrying you at this time; and you are feeling pressured and have a bit of anxiety from what is going on, perhaps you have a conversation with either yourself or spouse. Discuss increasing your emergency fund to start saving more from each pay check because that will give you more of a sense of ease and comfort.

Or if you are just starting out in the baby steps, it’s suggested to save $1,000 as your starter emergency-fund. Again, if you are worried and have hesitations about how things are, then increase your emergency fund to an amount where it helps your feel more comfortable if something were to happen and you would need to dip into it.

Remember, Emergency-Funds are “break the glass” type of moments. Not, “I want to buy this new couch” moments.

Debts and Mortgages

If you have either of these, continue to try and get these paid off in a timely manner. The less debt you have, means the less you are giving your income to someone else, and the more of your income you have to put in your bank account. Don’t stop attacking these to set money aside for increasing your emergency fund. It may seem like the right idea, however, now you have created yourself a bigger mess by delaying your debt.

Your debt isn’t going to go away, so better to continue to pay it off when you know for sure you have the means and are able to do so. Again, it is not for certain that a recession will happen, so before it potentially does, continue paying off your debt (or your mortgage) with the same intensity as you have been doing, before you are left trying to figure out how to pay them off with potential stress or worry of job loss, etc.

One exception to this would be if you know you will be losing your job in the near future. If you see the writing on the wall that your job is being eliminated or your company is going out of business, it is a good idea to pile up as much cash as possible. Dave Ramey always says that you should be working through the baby steps and the only exception to that would be to pile up cash in order to avoid going further into debt, especially when you know a life change is coming up!

Current Investments

KEEP INVESTING – don’t stop because something “might happen”. If that was the case, no one would ever invest anything. Continue to put the suggested 15% of your income towards your investments, or continue with the plan you currently have. The key is, just don’t stop or decrease your investments because you are worried. And most importantly – don’t take anything out (or more than what is normally taken out of your monthly withdrawals).

If you have questions, call or set up an appointment with your financial advisor, ask those questions, and discuss strategies. Even a simple phone conversation with them could help your worried mind and allow you to get a few extra winks of sleep at night.

Budget

There’s that “B” word again that you always hear me talking about. If you have never done a budget before, maybe now is the time you start one. This will help keep you on track from over spending, and help you set boundaries on your daily living expense to help you save more in case something were to happen.

Track your planned dollars and dollars spent

We suggest using the EveryDollarApp through Ramsey Solutions. If you have a Ramsey+ membership, you can use the premium version and link your bank account to it. If an app doesn’t seem like the thing for you, an excel sheet will do just fine. The important thing to remember is to start the month out with target numbers for each line item, and go back in and track those expenses routinely. Review the budget a few times a week to make sure you are not overdrawing on the dollar amount you set for yourself in a specific category. This also gives you the ability to adjust your budget as needed to cover unforeseen expenses, or if you notice you are overspending in a category, you can pull from another area to compensate and still keep the dollar amount you want to go into your savings “safe” from being spent.

Trim the budget where you can

Take a look at the items you are spending money on and see where you can “trim the fat” to put a few extra dollars in your emergency fund each month. Do you have several streaming services; what about canceling one of them? Have a coffee addiction; set out a specific amount of cash and that is your limit to splurge on coffee. When the dollars are gone, looks like it’s coffee from the break room for you until your month resets. Who knows, you may find multiple things you were spending your money on monthly that you realize you can go without for some time, or don’t need at all.

Delay instant gratification

We live in a society where things are at our fingertips and we can know answers immediately. Sometimes wanting something is as simple as a click of the “Buy Now” button, and you get it two days later (thanks Amazon Prime). Try delaying the immediate urge to purchase an item in that moment because you like it or “deserve it”. Or postpone going out to lunch by yourself and reserve that to only when you make lunch plans with a friend every so often. I know these aren’t fun things to do, but they can help you save several dollars a week. This adds up to a lot at the end of the month that you can put towards paying off your debt or putting in your emergency fund if you are worried right now with the current economic status of things.

Don’t be a Dooms-Day Prepper

We understand no one wants to hear the words “recession prepping” because no one wants to have to deal with it. But we also don’t want you going overboard with things like selling your home, liquidating your investments or stock piling dollars under your mattress.

We are not saying being prepared is a bad thing, in fact it is something we encourage. However, we don’t want the talk of recession keeping you awake at night and going to extremes. We want you to feel confident and ready for anything to come your way if something financially were to happen. We know money can cause emotional reactions and cause more stress in already stressful situations. Hence why we encourage being prepared with a plan.

Get yourself in a good state of mind

Again, if you are worried about the potential of a recession happening soon, review this checklist. Are you following our suggestions? Are you able to say with confidence you are doing these things to prepare yourself in a logical, informed matter? If you are worried, again, reach out to your financial advisor and have a conversation with them.

And if talking with them does not calm your nerves or help you sleep better at night, create a support system that can help ease your worries. This could include close family members and friends, or you could reach out and talk to a counselor if you feel it has gotten that far. Financial situations can be stressful, and with the fear of potential job loss could increase these worries and concerns further. Having the right support in place, or at least identifying who you would reach out to, can help set you up for success if something like a recession were to occur.

Lastly…

Remember, you will get through this. No, inflation is not fun, and we all do not like it, but you will be able to make it through the rough patches. And if a recession does happen, you will get through that as well. And by being prepared, logically, you will weather the storm just fine.

Our Chief Investment Officer just wrote an article last month giving a market update (spoiler alert: he shares data from a few different economists and their forecasts are not as negative as what you might be seeing on TV recently). The article is packed with a lot of information and as we all know, knowledge is power so if you haven’t already, be sure to check out that article HERE.