Economic recession often correlates with weaker job security, lower investment returns, and diminished consumer purchasing power. As a result, it can have significant implications for your personal finances.
Fortunately, you can insulate yourself from the worst effects and turn this period into an opportunity with the right preparation. If you’re concerned about current economic trends, here’s what you need to know to prepare for a recession in 2022.
Are We in a Recession?
Generally, an economic recession is a decline in economic activity for an extended period. Textbooks typically define it as two consecutive quarters of negative economic growth, measured by the national gross domestic product (GDP).
By that definition, we’ve been in a recession since the summer of 2022. GDP growth was negative 1.6% in the first quarter of the year and negative .6% in the second, based on the most recent economic research from the Bureau of Economic Analysis.
However, there’s still significant debate regarding the possible recession since some conditions are noticeably different than during previous downturns.
For example, the latest data from the National Bureau of Labor Statistics reported a low unemployment rate of just 3.7%. For context, it peaked at roughly 10% during the Great Recession and a whopping 24.9% at the peak of the Great Depression.
However, other warning signs seem to indicate more economic trouble on the horizon. For example, inflation skyrocketed this year, reaching 7.5% year-over-year by January 2022 and (hopefully) peaking at 9.1% in June.
Also, the Federal Reserve Bank Chairman stated at a July 2022 press conference that they expected a “softening in labor market conditions.” In other words, more people are going to lose their jobs.
While there’s ultimately no way to know what the future will bring, it’d be wise to take steps to protect yourself from the current economic risks. As the old saying goes, it’s better to be safe than sorry.
How To Prepare for This Recession
Recessions are an inevitable stage of the economic cycle. Since avoiding them isn’t on the table, you just need to weather them as gracefully as possible. Here are some of the best ways to protect your finances.
Make Yourself Indispensable
Recessions have many scary implications for consumers, but mass layoffs are perhaps the most significant. An extended period of reduced income and no health insurance due to job loss can be dangerous for those with thin financial margins.
Unfortunately, the percentage of people living paycheck to paycheck is higher than ever, including 78% of those earning less than $50,000 annually. Even a brief period of unemployment could send their households into a downward financial spiral.
Though easier said than done, especially on a short time horizon, making yourself more valuable at work can reduce the likelihood of losing your job if your company needs to tighten its belt.
As a result, it’s a good idea to look for ways to go above and beyond at work during recessions. For example, that could mean becoming the only one of your peers with expertise in an essential function.
Start a New Source of Income
While you can often improve your job security by making yourself more valuable to your company, you’ll never have the final say over your employment status. As a result, having a second income stream that you do control can be invaluable in recessions.
If you experience sudden job loss, you can put more time into the extra source of income and hopefully continue to pay your bills without relying on savings or unemployment insurance.
Even if you keep your job, a second income stream can give you some additional cash flow, which can be highly beneficial during a recession. For example, it can help you stave off the effects of high inflation or purchase more assets while they’re at a discount.
Fortunately, starting a small business or side hustle has never been more attainable. There are countless opportunities to make extra income through rideshare and delivery apps, freelance marketplaces, and platforms like Airbnb.
While you might prefer to look for a highly scalable or enjoyable hustle during less volatile times, you may be better off prioritizing reliable and low-risk options during a recession.
Save Money
It’s definitely worth taking steps to preserve and diversify your income streams during economic downturns. However, even the best-laid plans go awry, and there’s always a chance that you’ll have to go without a paycheck for a while.
Therefore, you must save a healthy emergency fund when your earning power is high so you can pay your bills if your income decreases or disappears.
Aim to have at least six months of living expenses since that’s about the limit of how long it takes to find new employment after losing a job. If you’re more conservative, then you can hold as much as a year of expenses in emergency savings.
However, holding too much in cash can cost you in an inflationary environment. Even online savings accounts generate negligible returns right now, so keep as much money as you need to sleep soundly at night, but no more.
Pay Down and Avoid Debt
Debt can be a powerful tool for increasing your purchasing power, and calculating how much you can afford to borrow is relatively straightforward when your income is reliable and your job secure.
However, the risk of layoffs can make even relatively low debt payments financially burdensome. As a result, it may be a good idea to pay off your debts when entering a recession.
If you have outstanding credit card debt, it’s a good idea to start with that. It’ll probably have a higher interest rate than your other accounts. Alternatively, you can prioritize paying off installment loans since they usually have higher fixed payments.
Of course, it’s just as important to avoid taking on additional debts. Look for ways to reduce your day-to-day spending and consider postponing significant purchases.
Factor Economic Conditions into Investment Plans
Generally, when you make enough money to save each month, some of your net income should go to investments like stocks and real estate.
However, you may need to reconsider where your excess cash goes during an economic downturn. Not only is it more important to build an emergency fund and pay off your debts, but investing also becomes more complicated.
For example, we’re currently in a bear market, which means stock prices are falling. The S&P 500, a popular market index, has dropped 25% since the beginning of 2022 at the time of writing.
You may feel tempted to panic-sell, and that’s generally a bad idea. However, you may want to consider avoiding putting more money into the stock market while it’s still falling.
(Garit feels strongly that there are better alternative asset classes you can put money into, such as artwork. We’ll also dive into I-Bonds below.)
Meanwhile, real estate prices have also started to fall in many parts of the country. In 11 markets across the country, housing prices have already fallen 5% since their peak in May.
Economists at Moody’s say they expect real estate prices will go down by 15-20% across many markets if the country goes further into recession.
With rising interest rates making homes even less affordable, our analysts believe it’s probably not a good time to buy.
If you’re unsure how to factor current economic conditions into your plans, consider consulting a financial advisor for investment advice. Make sure to prepare a personal income statement and personal balance sheet beforehand.
Consider I-Bonds
The United States is experiencing a higher inflation rate than it has since the early 1980s. Whatever cash you hold is losing its purchasing power alarmingly fast.
To protect your money from the effects of inflation, consider buying I-bonds. They’re a form of government-issued bonds that guarantee returns equal to the national inflation rate, updated semi-annually. Through October 2022, their yield is 9.62%.
Since the stock market only grows about 10.09% per year on average, that’s an incredibly high rate of return for an investment with virtually zero risk.
You can get up to $10,000 per person (or business) in I-bonds per calendar year, but you must hold it for at least one year before you cash it. In addition, you’ll lose three months of interest if you cash it in before five years.
See This as an Opportunity
Rising unemployment, surging inflation, and falling stock prices can make recessions anxiety-inducing. However, doing your research, bolstering your financial position, and bracing yourself for tough times can help you turn this period into an opportunity.
Instead of letting fear of a potential recession paralyze you, focus on the things you can control. Use the challenge as motivation to improve yourself by taking your finances to the next level.
Find ways to increase your earning power, build an emergency fund, and pay off high-interest debt. Not only will these things help you survive the recession, but they’ll also benefit you for many years to come.
This article originally appeared on DigitalHoney.money and was syndicated by MediaFeed.org.
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23 jobs that are pretty much recession proof
Do you want to keep your job during a recession? Let’s talk about the recession-proof jobs that you can choose in any field. While no job is 100% recession-proof, certain career fields are impacted less during a recession.
During an economic slowdown or downturn, there are generally layoffs and fewer job offers. It is harder to get a job since many sectors get hit. Everyone will experience a recession differently, but it will impact most people. Whether you have high-income skills can become irrelevant quickly.
At any time a recession occurs, many are worried about their jobs. During the 2008 recession, the unemployment rate was over 10%. In the recent pandemic, the employment rates quickly rose to 14.7%. It has since come down to 8.4%, which is still significantly higher than the 3.5% before the pandemic.
Are you looking for career fields that are impacted less during a recession? While there is absolutely no guarantee, specific industries or professions are essential for our society. Here is a selection of recession-proof jobs at every skill level.
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It doesn’t matter whether you’re a registered nurse, doctor, assistant, or anything in between. Having a job in the medical and healthcare field is a great place to be during a recession.
Even when a recession hits, people will get sick, and health care is needed. Hospitals or clinics are a great career choice if you want to have job security. Plus, if you’re someone who has a nonmedical job in a healthcare clinic or hospital, you may benefit from this as well. As long as health care is needed, you will be as well.
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Technology is advancing daily, and we’re trying to benefit from that. Companies are improving systems to replace manual labor and save on expenses.
If you’re looking for a recession-proof job, working in the IT field is something to consider. People need help with their computers, phones and software more than ever before. Our world relies on technology and needs IT professionals to function.
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Whether there’s an economic crisis or not, accountants and auditors have a relatively recession-proof job. As long as businesses will continue, they need an accountant to report their yearly numbers and check their books. With their qualifications and specific skill-set, job opportunities are all around.
Also, people who have an accountant file their tax returns will most likely still use that. It’s better to pay an accountant than to make a mistake that costs more than their rate.
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An unfortunate side effect of a recession is that many are going into debt. People will add more money to their credit card balances, rack up more debt and need help managing it.
As a debt management professional, you help people reduce their debt and prevent bankruptcy from happening. You help people that need money now to reduce their debt.
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When we are talking about core services that we will always need, utility workers are providing them. We still need support in waste management, water, electricity and other utilities. Everyone is using these services daily, meaning there is constant and high demand.
The high demand combined with the aging current labor force means that there will be a labor shortage for years to come. If you’re looking for a recession-proof job, utility workers are high on the list.
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Just as utility working, public safety professionals are crucial to society during any time in the economic cycle.
Working as an ambulance driver, firefighter or police officer makes you relatively recession-proof. It is also a great option when you are looking for a job where you can help others.
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If you work for the government, you have one of the most stable jobs there is. Government jobs will be influenced little by the economic cycles, as there is a constant need for them. Also, the government is a big organization that will not downsize the moment a recession hits.
When you are applying for jobs, check out the postings they have online. It is a stable career path for your work life. Don’t worry if you are an entry-level worker without a lot of work experience. You can choose from several jobs at all levels.
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People need education, no matter the state of the economy. Teachers are essential, even during times when learning takes different forms. It doesn’t matter whether you are providing online classes, the need for education is still there.
Stanford economist Caroline Hoxby found that colleges and graduate schools saw higher enrollment numbers during the Great Recession. People want to postpone their entry into the job market since there are fewer openings. They enroll in higher education instead.
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Online shopping and delivery services have increased over the years. In the last couple of months, delivery services are booming. People want to avoid going to shops, and ordering your things online is easier than ever.
You can deliver groceries, clothes, household items, furniture and more. Everything that you have in your home, you can transport. The continued increase in people having things delivered makes delivery and courier services, one of the most recession-proof jobs out there.
Extra tip: Deliver groceries through Instacart. With Instacart, you can determine your own schedule, and you get paid to deliver food to peoples’ doorstep.
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Whatever the state of the economy, people still need to get their car fixed. While people will skip the smaller optional repairs, most auto repairs are mandatory to keep driving safely.
Many people wait to buy a new car and will get their current one repaired instead. Because older cars need plenty of maintenance, auto mechanics will not be bored.
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If you are working in law enforcement, you have a job that won’t stop just because of a downturn. People still want to live in a safe environment, and laws need continuous enforcement. Whether you are a federal agent or a detective, your job will be relatively stable during recessions.
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Corrections professionals like corrections officers and parole boards are great recession-proof jobs. They often don’t see layoffs at all during a recession.
Just as in law enforcement, prisons operate as usual, and everyone involved will need to continue their work.
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When the economy experiences a downturn, everyone that is involved in the justice system stays employed. Whether you are a judge or work in a related service like the court’s security, you will keep working.
Currently, with the pandemic, some courts are closed or postponing services. It is not something related to an economic downturn, but rather to the current global health crisis.
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Whether the economy is crashing or flourishing, funerals and cremations will continue. Certain families may go for the less expensive option, but there will still be enough work during a recession.
While this may not be your dream job, think about it in your search for jobs. If you’re looking for a new job or are unemployed, this field may be an opportunity for you.
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In big cities, public transport workers are always in high demand. People taking public transport to work may even increase during a recession, as some may have to get rid of their car.
Whether you drive the bus or sell train tickets, public transport workers will have relatively high job security when a recession hits.
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The moment a recession hits, people are slowly going to decrease their discretionary spending. They don’t buy things they don’t need, search for no spend ideas and look into at-home date night ideas. They’re staying in more and going out less.
When you cut down on how often you go out to eat, you will do more grocery shopping. While there are some quick tips to save money on groceries, you will still need to get groceries. If you’re looking for a job, a grocery store worker may be more stable than other jobs.
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Just like other healthcare services, pharmacists will see a steady stream of customers. People will still need their sleep medication or antibiotics. With the population aging, this can be one of the best recession-proof jobs for years to come.
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The general population ages, creating more jobs for senior care professionals. People need assistance living in nursing homes and at home, even during a recession. People need quality elder care, unrelated to the current economic situation.
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On the one hand, some people may stop their therapy sessions if their financial status is declining. On the other hand, when a recession occurs, many people are stressed out. It can cause more mental health problems and more marital problems. Some people will develop an anxiety disorder, while others will turn to alcohol.
Mental health professionals are crucial at the time a recession or economic downturn hits.
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As with health care for humans, pets also need health care during recessions. While people do bring their pets to the vet, they do so less regularly. With people having more pets and spending 7% more on pet care every single year, we can conclude it’s a rather recession-proof job.
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Actuaries help with the risk analysis of businesses. In normal economic circumstances, their jobs are necessary for companies to assess risks and hedge for them. In an economic downturn, analyzing risks is even more essential.
Actuaries help companies analyze the areas with high risk, the best places to cut costs, and increase efficiencies. In times of crisis, these are all valuable things to know. Generally speaking, actuaries will keep their jobs during an economic recession.
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Digital or not, marketers have a great shot at keeping their jobs during a recession. Most marketers will increase the investment made by companies. For every dollar companies spend on their marketing budget, they want to see more than that dollar returned.
For example, at my company, we have marketers who will return $1.50 for every $1 invested in the marketing budget. No matter how much money you put into it, you will get more out.
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During recessions, couples won’t stop getting divorced. As financial distress is one of the main reasons for divorce, recessions may increase divorce rates. On the other hand, financial hardship may keep couples together.
If you are a divorce attorney or mediator, you will still have enough work during downturns.
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Why are some jobs recession-proof while others aren’t? Plus, how is your specific job doing when it’s not on the list? Don’t worry. The fact that your job isn’t on the list doesn’t mean that you’ll get fired next week.
There are a couple of things to consider when you want to know if your jobs can survive a recession. Ask yourself:
- Is your job essential for society? For example, without healthcare or public transport workers, there would be chaos quickly.
- Are you filling a need? For example, people want to get their pets healthy again.
- Do you need specialized training or experience? For example, IT professionals or accountants have specific education and experience that is hard to obtain quickly.
If you don’t answer yes to all three questions, don’t worry. There are so many jobs that are crucial to our society and general well-being. We simply weren’t able to list them all.
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While no job is 100% recession-proof, some jobs are more recession-proof than others. That said, recessions are hard and affect our society in many ways.
If you’re worried about layoffs or you already lost your job, go through the list of these best recession-proof jobs again.
See what jobs suit you and start to include those jobs into your job-search. Searching for a new job and job-hunting, in general, can be challenging.
Find career opportunities for a job you enjoy by checking online job boards, (online) job fairs, vacancies, and make sure you connect with recruiters.
Finding a job or finding employment depends on the career path you want to take. Check out the available jobs that are currently trending and looking for staffing. You may find your dream job that is entirely recession-proof!
This article was originally published on RadicalFire.com and syndicated by MediaFeed.org.
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