As inflation gradually decelerates, investor anxiety over a prospective U.S. recession is escalating. According to Nationwide’s recent survey, a daunting 68% of participants expect a recession to hit within half a year.
Moreover, 62% envision this recession equaling or surpassing the severity of the devastating 2007-2009 Great Recession.
The survey reveals that the fiscal pinch has not left the American populace. Dining out has become a luxury, major acquisitions like homes have been delayed, and reliance on credit cards has amplified. These were the trends among the 2000 respondents surveyed between March and April.
Kamila Elliott, a certified financial planner, the co-founder and CEO of Collective Wealth Partners, and a member of the CNBC Advisor Council, has witnessed firsthand the anxiety that people are feeling about this potential downturn.
However, she firmly believes that despite some negative press, the economic landscape still holds plenty of positive signals.
Tip 1: Frugality and debt repayment
Elliott’s advice for weathering this forecasted recession involves controlling what is controllable in one’s financial life. Firstly, she suggests revisiting your transaction history to isolate unnecessary spending and cut those costs.
With the savings thus accrued, she advises tackling any outstanding debts. Debt reduction, according to Elliott, can set you up favorably if the recession predictions come true.
Tip 2: Bolstering your emergency fund
Further, Elliott encourages an increase in emergency savings, thereby improving your liquidity. These savings can act as a financial cushion during times of crisis, like a layoff or unexpected expenses.
As a rule of thumb, experts usually recommend having between three to six months’ worth of living expenses as an emergency fund.
The silver lining in these stormy economic forecasts, Elliott believes, is the current robust job market. She has seen her clients swiftly rebound from layoffs, with unemployment periods usually lasting less than three months.
Tip 3: Calculated risk in investments
Another aspect that Elliott focuses on is the potential for opportunistic investing. She recommends that those nearing retirement should consult a reliable financial planner to ensure they’re on track.
For individuals who are a decade or more away from retiring, the impending recession could present a unique investment opportunity. Given the time they have to weather market instability, they could afford to take more calculated risks.
Despite fluctuations, the average market return is generally resilient and can offer substantial gains over the long term.
Echoing the words of investment maestro Warren Buffett, Elliott affirms, “Be fearful when others are greedy and greedy when others are fearful.” She advises her clients to apply this philosophy when assessing investment opportunities, especially during times of heightened fear and risk.
In this vein, Elliott sees the possible recession as a chance to buy securities that are currently undervalued. As she astutely puts it, “For many, we’re using it as a buying opportunity to buy certain securities that are priced fairly low right now.”
Bottomline is navigating a recession requires a strategic approach to spending, saving, and investing. Despite the alarming predictions, there’s an opportunity for individuals to reinforce their financial footing and even capitalize on the situation if they follow prudent advice.
