It pays to take this advice to heart.
- Like many financial experts, Suze Orman is worried about a near-term recession.
- In light of that, she says to conserve as much money as possible.
For weeks now, financial experts have been sounding a warning that the U.S. economy is headed for an extended slump. Now to be clear, recessions aren’t always prolonged events. Some can be short-lived, and some can have less of an impact on employment levels than others.
But generally speaking, during a recession, economic conditions worsen, consumer spending declines, and joblessness climbs. And Suze Orman thinks there’s a good chance we’ll enter recession territory later this year or in early 2023.
In light of that, she has one big piece of advice for consumers. And it’s advice worth taking to heart, especially if you don’t have a very large cushion in your savings account.
Conserve, conserve, conserve
The most important thing you can do in today’s economy is conserve your funds big time, Orman said in a recent podcast. That’s because you never know what sort of blow a recession might deal you personally.
While you’re not guaranteed to lose your job during a recession, it’s a possibility you can’t discount. This especially applies if you work in an industry that’s likely to take a hit when consumer spending wanes, like retail or hospitality.
That’s why Orman says it’s so essential that consumers work on conserving funds over the next few months. This especially applies to those who don’t have a reasonable amount of money in their savings accounts.
In fact, Orman thinks that it’s a good idea to have around a year’s worth of living costs in an emergency fund. That could be the ticket to getting through an extended period of unemployment. And while 12 months’ worth of bills may not be a realistic savings goal for you, it does pay to start spending less and saving more — in case your personal situation takes a drastic turn for the worse.
How to conserve funds
Conserving funds often boils down to setting priorities when it comes to spending. If you’re overwhelmed by the idea, start by mapping out a budget that lists your various expenses. Then, see which expenses are negotiable and which aren’t.
Medication, for example, falls into the latter category, as does your auto loan payment. But if you’re currently paying for things like cable, streaming services, yoga classes, or subscription boxes, those are costs you may be able to cut.
Of course, cutting back on spending isn’t the only way to shore up your finances. You can also try boosting your income with a side hustle. The key, either way, is to add to your savings if you don’t have a solid emergency fund in light of the potential economic downturn we may be looking at.
Try to stay calm
The idea of a recession may be stress-inducing — especially if your finances already took a hit during the pandemic. But rather than lose sleep worrying about a recession, be proactive.
Rework your budget to free up more cash for savings, or take other steps to boost your income. That’s really the best thing you can do to prepare for a recession — and get through one without too many long-term effects.
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