NEW YORK (AP) – Gas, food and rent prices are rising. The Federal Reserve has raised interest rates to the highest level since 2018. The US economy has contracted for two quarters in a row.
Economists are divided on whether a recession is looming. What is clear is that the economic uncertainty is not going away anytime soon. But there are steps you can take now to be ready for what’s to come.
Yiming Ma, an assistant professor at Columbia University, says it’s not a matter of if but when a recession will occur. People should prepare, but not panic, he said.
“Historically, the economy has always been up and down,” Ma said. “It’s something that just happens, it’s a bit like catching a cold.”
But, he notes, some people’s immune systems are better able to recover than others. It’s the same with finances. If you think a recession could destabilize yours, here are some things you can do to prepare.
KNOW YOUR EXPENSES AND MAKE A BUDGET
Knowing how much you spend each month is key. Mom recommends sitting down and writing down how much you spend each day. This will help you see what’s coming in, what’s going out, and what unnecessary expenses you could cut.
“By understanding what money you’re getting and what you’re spending, you may be able to make changes to help you through tough times,” advises the Federal Deposit Insurance Corporation. Smart moneya financial education program.
Budgets often reveal expenses that can be completely eliminated or impulse spending that can be avoided with planning.
For guidance on creating a budget, free courses such as ” Create a budget (and stick to it) ” by CT Dollars and Sense, a partnership of Connecticut state agencies and Nerd Wallet Budget Calculator may be good places to start.
Save as much as you can
The more non-essential expenses you can cut, the more you can save.
It’s not possible for everyone, but Gene Natali, co-founder of Troutwood, an app that helps people create financial plans, says it’s ideal to budget to save enough to cover basic needs for three to six months.
Programs like save americaa nonprofit campaign by the Consumer Federation of America, can help create a roadmap.
And if you have a savings account, it’s important to check if your bank offers a good interest rate and look for one if not, Ma said.
His advice is to watch out monthly installments or service charges that may affect your savings. But don’t limit your options. Online banks sometimes offer better rates than traditional banks.
CONSOLIDATE YOUR LOANS, AND DON’T APPEAR ANY MORE
As interest rates rise, experts recommend consolidating your loans to have just one fixed-rate loan and, if you can, pay off as much of your debt as possible.
“Job security tends to be worse when a recession hits, it’s not a good time to accumulate debt,” Ma said.
With interest rates high, it’s also not a good time to take out new loans for big expenses like cars, although experts recommend that if you need durable goods like vacuum cleaners, stoves or dishwashers, buy them as soon as possible to avoid it future price increases.
VISIT SECOND HAND SHOPS AND YARD SALES
Allen Galeon, a home caregiver in California, has been affected for months by rising prices for household staples like groceries, paper towels and gas for his commute.
Her son’s favorite Hi-C orange juice, which was $1.99 for a six-pack, is now $2.50.
Since the start of the pandemic, when Galeon stopped caring for multiple families on a single client to reduce their health risks, their home has suffered from financial instability.
One of the choices she’s made is to buy items like clothes and electronics second-hand whenever possible, whether it’s at Goodwill, pawn shops, or Craigslist. And Craigslist lets you search by area, cut down on driving, which means less gas and hassle.
NEGOTIATE YOUR MONTHLY BILLS
Since the pandemic, many companies have updated their relief policies and become more flexible with users, according to Kia McCallister-Young, director of save america.
Calling monthly service providers to negotiate bills, whether it’s utilities, phone service, cable, Internet or auto insurance, can add up to significant savings, McCallister-Young said. Individuals can ask for the best rate, available discounts, rebates or coupons that can lead to a reduced monthly fee. If a supplier is competitive with other companies, there is an even greater chance of getting a discount, he added.
“If you tell them, ‘I’m thinking about switching’ or that you’re buying, that helps; if they know you’re thinking about leaving, they’ll give you the best rate, and the goal right now is to find as much cash flow as possible.” he said.
Check out federal programs like Energy assistance program for low-income households, that helps cover bills, and lifeline, that can help with phone bills. If you’re not sure if you qualify for a federal or state program, you you can call 211which will connect you with a local specialist who can help.
CHANGE YOUR OUTFITS
Buying groceries with a meal plan, buying generic instead of brand or buying in bulk are some of the recommendations of the Consumer Federation of America.
“A lot of stores have price matching, so if you show them that a competitor is selling the same product at a lower price, they’ll match it,” McCallister-Young said. “You also want to look at the stores closest to you, so you don’t spend the extra money you’d save on gas.”
An alternative way to save money on groceries is to check out food sharing apps like oil, that connects people in your community to share additional grocery items, and too good to go where customers can buy surplus food from businesses at a discount.
SEE GOVERNMENT ASSISTANCE PROGRAMS
Even with these saving and spending practices, one month’s salary is not always enough to cover major expenses. If this is your situation, there are programs around the country available to help.
“Sometimes there’s not enough ‘end of the month’ at the end of the month,” said Michael Best, an attorney with the National Consumer Law Center who works on financial services issues.
To make use of these resources, check if you meet the requirements for a Emergency rental assistance program, Supplemental nutrition assistance program, Farmers Market Nutrition Programor the Owner Assistance Fund. These are all federal programs coordinated by state governments. Some states offer additional local programs for their residents.
SEEK COMMUNITY ASSISTANCE
If you are experiencing food or housing insecurity, look for community or non-profit organizations in your area. From housing support i food banks a public service assistance, nonprofits across the country can help. National organizations such as Feeding America host food banks in all 50 states.
“We are already seeing the community coming to us in overwhelming numbers because of what is happening in the country in terms of economic stability,” said Kavita Mehra of Sakhi for South Asian womenan organization that helps survivors of domestic violence in New York City.
Her organization provides housing, food and emergency cash assistance to people in the community. She said that between January and June, her group distributed more than $150,000 in emergency cash assistance to survivors who were having the hardest time keeping the lights on and food on the table. That’s more than all of last year.
TAKE CARE OF YOUR MENTAL HEALTH
Between worrying about bills and not knowing what your financial future might look like, your stress levels can go through the roof.
“It’s a hectic existence,” Galeon said. “You have to do a lot of management, and you have to keep a cool head, for the sake of your mental health.”
Debra Kissen, Clinical Director of Light On Anxiety CBT Treatment Center, recommends first recognizing when your body is stressed. He then advises mindfulness exercises such as breathing, touching a wall to calm down and completing the Exercise “five senses to relieve anxiety”..
Most health insurance policies cover some form of mental health care. If you don’t have health insurance, you can find therapists on a sliding scale across the country, including through Find Treatment.gov and the Anxiety and Depression Association of America directory
The Associated Press is supported by the Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.