Updated: Jul 15, 2022
Today's report...Trucking prices up 24% producer prices inflation at 11.3%! Producer prices mean the cost to produce goods. When the cost to produce or process food, furniture, appliances, clothing, etc. go up our cost goes up. Also today the statistics were announced showing a reduction in online shopping and shopping in general. As buying decreases we creep closer to recession. AND mortgage rates are now at 5%!
What can you do now to prepare for a recession?
1. Increase your food and non-food storage efforts. I know you always hear that but during a period of inflation like the one we are experiencing now prices rises dramatically. These prices do not immediately ease during a recession, in fact they may never go back to previous prices. We saw that during the last inflationary period. Peanut butter is an example most can relate to. During the last inflationary time prices rose and the size of the containers decreased at the same time. Peanut butter went from $1.25 to over $2.30 and it did not come back down during or after the recession. Stock up now and you never have to pay full price again, you can wait for sales. The war in Ukraine is already taking a huge toll on worldwide food supplies. Purchase more food now and/or plan now to grow and preserve your own.
2. Get out of debt. The Treasury has already raised interest rates three times this year. Rates will rise on new loans and on credit cards as we move forward. Pay off the highest interest debts you have now. If you have a variable interest rate loan pay it off or pay it down as quickly as possible before the payment goes up. Don’t forget student loans.
3. Step up your savings efforts. If you pay into a savings account monthly increase the amount you add each pay period. Recession means job losses. Could you be one who loses a job? It is not unusual for the most senior employees to be the ones fired during a recession, they make the most money. Remember the phrase last in first out? Those hired last and those making the biggest salaries will be the ones most likely to lose their jobs. Those in the construction industry are also at great risk as during a recession housing construction slows. Less orders, fewer employees needed in manufacturing positions in all industries, fewer people eating out, freeze on hiring, all industries will be affect resulting in job losses or reduced hours.
4. Create a second income stream. You may be thinking you do not have time for another job or that you do not have the expertise or talent to sell online. Get busy and think out of the box. Income is not all about cash. Can you sew, cut hair, take photos, cook, fix cars, teach? Could you barter those skills? If you have any of these skills, or many more, hone them now. If you sew stock up on thread, needles, buttons and be prepared to alter clothing for less than the local pros and take on a few jobs now. If you are a great cook or baker begin now to develop recipes that could be delivered to those housebound and reliant on food delivery and begin deliveries now. You can do it better and less expensively. Birthday cakes are expensive from a bakery, even the grocery store bakery. Put your hobby to work and begin making a cake or two a week. Our grandson earned money making cinnamon rolls for delivery on holidays.
5. Work on your credit score. Check your score now and work to improve it. If you should lose a job or find your hours reduced, you may need to borrow money to pay bills. The lowest rates go to those with the best credit scores, after all, they are the ones most likely to pay their debts.
6. Think housing. If you are a renter, start reducing expenses so you will have money saved to pay the rent if your income is interrupted or reduced.
If you plan to buy a home this year or next, have realistic expectations about what you can afford and make sure you have a financial cushion to protect you. Know what you can afford now without the hope or expectation of a future raise in income.
When you buy a home, a lender will want to see some money in savings even after you purchase the home building confidence you can make payments. Also, save with the knowledge you will need repairs, all homes do.
7. That nasty word….budget. Make sacrifices now and you may be able to not only stay current on bill paying but also take advantage of opportunities in the future. During a recession you may find great deals on everything from furniture and autos to homes. We will be sharing ideas at Totallyready.com on ways to sacrifice a little now. Prioritize paying off debt and building savings.
It is never too early to begin preparing for what may be. It is also never too late to begin. Whether you have been preparing for years or you are new to preparing now is the time to evaluate where you are. Do not run before you learn to walk. Ask for help, tackle one task at a time and then move forward and work on two at a time, then three.
“Decisions determine destiny” (Thomas S. Monson) What destiny are you choosing?