It’s okay to feel concerned about recent economic news. Despite what you may have heard, there are reasons for optimism, and things you can do now to prepare for a recession – if one comes. In this article, we’ll help you understand a diverse range of views about the future of our economy, and explain how recessions can affect you and what you can do to prepare for one now.
Market predictions aren’t an exact science.
While most market experts expect the economies in North America to slow, how it’s going to affect Canada is still being debated. The United States just experienced two quarters of negative GDP growth in a row. Though that meets one of the technical definition of a recession, others disagree, pointing to strong job numbers and other positive signs.
That’s because there are simply too many variables at play to say how deep a possible recession could be in the United States and Canada:
- Rising interest rates may slow down consumer spending in a significant way.
- This slowdown may impact housing markets, slowing sales and possible impact on prices.
- Escalation of the conflict in Ukraine could make worse the seemingly unrelated problems in consumer spending and housing.
- In the face of all these and other problems, central banks may be unable to curb or slow down inflation. (You may already be seeing this in the way energy and food prices have spiked.)
On the bright side, there are reasons why we could see the economy land more softly:
- Inflation could lower to a 3-4% range, allowing central banks to ease rates.
- Consumers could spend more some of their saved cash, or potential borrowings, than we’ve seen in the last 3 years.
- This increased spending could bring a boost to the service sector, which employs millions.
- We continue to see strong employment numbers in the US.
From just this brief overview, we can already see that predicting economic growth – or recession – isn’t easy. The sheer number of things that could decide the future make it hard to know for sure what’s going to happen.
What does that mean for me?
Regardless of what happens next, you should take steps now to get ready. Even though the future can be unpredictable, it’s generally the case that slowing economies lead to job losses. We’ve seen some evidence for this in the tech sector, where layoffs and downsizing are occurring. Meanwhile, overall employment numbers in North America are historically strong, so it’s best to be ready for anything.
How can I prepare?
Whether or not your job is in danger, there are some things you can do now to keep yourself ready:
- Save more: Try to increase your emergency fund contributions. Pre-authorized contributions to a savings account can help you build up cash for a rainy day. It also helps to have low-cost borrowing, such as a personal line of credit, on-hand.
- Brush up your resume: Stay prepared for a sudden change in employment and keep an eye on the job market. Doing so can help you figure out where you might work next.
- Make a budget: Look at what you’re spending today and see how you’d handle increased fuel, housing and food costs. Does your budget still balance? If not, see where you can either spend less or earn more.
- Review your insurance plans: Depending on the type you have, you could be protected in the event of job loss or other financial complications.
- Continue Investing: Though we’ll continue seeing market volatility, it’s in your best interest to stay invested. Keep investing regularly and stop yourself from making emotional money decisions. After all, there tends to be a delay between when markets recover and when average people see that recovery. In the meantime, staying invested helps you make the most of the upswing, when it comes.
Not everyone can save more, earn more, balance their budget as it is now or continue investing. That’s why it’s so important to ask for help.
Speak with an advisor today.
The best way to know whether you’re still on track to achieving your financial goals is to speak with a trusted advisor, a real partner who will take the time to listen to you and who will help you craft a plan based on your unique needs. Visit a branch, book an appointment online or call us at 1.888.517.7000.