Money Musings 💠Let’s get recession ready (as much as we can)
Anyone else have recessions on their mind? 🙋‍♀️
According to economists, the chance of a recession in the next 12 months is 30%.
What does this mean?
While a recession sounds scary, the impact really depends on if it happens, the intensity of it and how long it lasts.
The definition of a recession is two quarters of negative GDP growth.
GDP stands for gross domestic product and is the most common method to track an economy’s health. GDP represents the value of all the goods and services produced over a specific period of time within a country.
The last recession in 2020 was so short that by the time we could say we were in a recession, it was over.
The Great Recession of 2008 resulted in a lot of job loss and substantial decreases in property value.
In a recession, employees face potential layoffs and business owners may encounter income loss (myself included).
Regardless of what’s in store for us, it eases my mind to have a plan(ish) for what I would do in the case of a recession.
So let’s get planning.
Starting today and over the next five weeks, the money move of the week will be dedicated to help you get recession ready.
Recession or not, these are important money moves to make so it’s still a win-win.
Keep me posted on how you are feeling and how the steps go!
P.S. If you are feeling nervous, I highly recommend this article. Farnoosh zooms out to show you trends in interest rates, inflation, and the stock market over the last 30 years. It gives some helpful perspective!
MONEY MOVE OF THE WEEK
GET RECESSION READY STEP #1 - BUILD YOUR RAINY-DAY FUND.
I heard from many of you back in 2020 that you either regretted not having or were motivated to start an emergency savings (or rainy day) fund. Most Americans couldn’t cover an unexpected $400 expense without borrowing money or selling something. So, if you don’t have a rainy day fund yet, you are not alone. Today is a perfect day to get started.
A rainy day fund provides us security in the event of an emergency (like income loss during a recession) but also gives us the freedom to make choices and take risks (aka leave the job you hate, move out of a bad living situation, etc).
I walk you through exactly how to calculate how much you need here. A great goal is to have 3 months of living expenses in your rainy day fund but if that feels daunting, start with $1,000.
After you’ve calculated this amount, set up a weekly or bi-weekly automatic transfer ($5 is a great place to start if $$ is tight) to a separate savings account. It only takes a few minutes to set this up - and it is WELL worth it for your peace of mind.
YOU GOTTA SEE THIS
THE MOST COSTLY CREDIT SCORE MYTH.
This commonly believed credit score myth upsets me the most because it costs people the most money. Here it is:
⛔️ Keeping a balance on your credit card helps your credit score.
This is NOT the case. When we keep a balance on our credit cards we pay credit card companies interest (a very convenient myth if I do say so myself 🤔). Holding a balance on our credit cards can cost tons of money in interest, especially with credit card interest rates at 20-25%!
Not only does holding a balance NOT improve your score it can actually decrease your score and cost you money in interest.
Now you know. Please spread the word!