Whatever happens, you’ll be better off if you have a plan
in October think there’s about a 48% chance that one will occur in the next 12 months. Essentially, it’s a 50-50 shot. If the local weatherman said the same of impending rain, would you bring an umbrella? If you would, you’ll want to come prepared for a recession, too.
Eight economists make up the NBER committee that evaluates whether and when the U.S. economy was in a recession . According to NBER, most recessions are brief. In fact, the most recent recession was just about three months, coinciding with the start of the Covid-19 pandemic in February 2020 and ending that May.The committee that calls recessions doesn’t do so in real time.
Instead, McCoy suggests doubling down on your financial goals and focusing on the big picture. To avoid making panicked decisions later, look at your fixed expenses—especially the big three: housing, transportation and food—and determine what you would be willing to cut from yourif your income decreased or disappeared. Think of it as a backup spending plan that you can activate at a moment’s notice.
Building savings from scratch can feel daunting. First, check that there are no “leaks” in your spending, McCoy says. That means identifying nonessential recurring purchases, pressing pause and redirecting that money into a savings account. “There’s a great percentage of Americans who are living paycheck to paycheck, but there’s also a great percentage of people who are spending their whole paycheck without having to,” McCoy says.
So how do you do that? Review your current holdings and ensure that they match your current risk tolerance and time horizon. Funds you won’t need for at least 10 years are considered long term, so can be left in riskier assets.
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