Pay down your debt
It’s better to start paying down your debt now if you can, rather than waiting for inflation to cool.
The Federal Reserve Bank of New York reported in August that total household debt in the U.S. climbed to $16.15 trillion in the second quarter of 2022. Credit card balances rose by 13% — the biggest increase in over two decades — as more Americans are struggling to meet their everyday expenses amid high inflation.
However, during a recession, there’s more economic uncertainty and less growth. This means there’s also a higher likelihood of job losses and pay cuts — in fact, the Fed is already projecting unemployment will rise to 4.4% next year and remain high into 2025.
Paying off your debt now means you won’t have to worry about piling on expensive interest. Plus you’ll be better equipped to deal with potential financial emergencies. There are generally two methods of tackling your debts: you can either start by paying down your loans with the highest interest first or the smaller debts that are easier to pay off quickly.
Stash some spare funds aside
As more Americans resort to living paycheck to paycheck in order to keep up with rampant inflation, fewer are able to focus on building out their savings.
Almost half of adults say they’re saving and investing less than usual, according to the latest data from the Ipsos-Forbes Advisor U.S. Consumer Confidence Tracker. And about three in 10 add that they’re resorting to tapping into their savings accounts more than usual.
You’ll want more cushioning to weather a recession — experts generally recommend you set aside three to six months’ worth of living expenses in normal circumstances. But if you’re struggling to save while prices remain high, start small and work with more attainable goals.
Diversify your income
You know what they say — don’t put all your eggs in one basket. And this is especially important in times of economic uncertainty.
You might consider taking up a side hustle for some extra cash to supplement your income. And it doesn’t hurt that it can serve as a financial cushion should you run into an unexpected expense or lose your job.
Insurance comparison website Insuranks reports that 93% of Americans who work full- or part-time have a side hustle — and 44% of them say they’ve taken on the additional work to help make ends meet.
If that doesn’t make sense for you, you could also find an alternative income stream through the stock market. Although business sentiment is low right now, that also makes it a great time to pick up shares on the cheap. Look into building a diversified portfolio with sectors that traditionally fare well over the long-term, like consumer staples, health care and utilities.
Kiss Your Credit Card Debt Goodbye
Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.