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A recession may be on the horizon.
Gas prices are at a staggering $5 per gallon on average. Rents are soaring and inflation is at 8.6% — the highest it’s been in 40 years.
The stock market is flirting with bear territory and bitcoin and other cryptocurrencies continue to crash.
In response to soaring inflation, the Federal Reserve is raising interest rates — a move economists worry could slow economic growth so much that it plunges the country into a recession.
A recession is defined as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” according to the National Bureau of Economic Research’s Business Cycle Dating Committee.
While certain parts of the US economy remain healthy — the 3.6% unemployment rate is historically low and job growth remains strong, according to the federal labor department — other red flags are popping up.
For example, the US economy declined by an annualized rate of 1.4%, according to the US Department of Commerce, in the first quarter of 2022 — a tell-tale sign of a recession.
How to Recession-Proof Your Finances
Investors and everyday Americans are holding their breath. After all, a recession could mean job cuts and tough times for people already struggling to make ends meet.
No one knows what the future holds, but there are steps you can take today to shield your finances from the brunt of an economic downturn.
Having an emergency fund, good credit, several sources of income and a diversified investment portfolio are all good places to start.
Here are seven things you can do to further safeguard your finances if a recession is on the horizon.
1. Pay Down High Interest Credit Card Debt
It’s getting more expensive to carry credit card debt.
The Federal Reserve raised interest rates June 15 by 0.75 of a percentage point — which means the interest charged on credit card debt is going up.
With average credit card interest rates…
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