In 2007, the U.S. housing market collapsed, causing a global financial crisis that resulted in millions losing their jobs and the most severe economic downtown for America since the Great Depression. Over the past 12 years, America has slowly tried to recover from the Great Recession, but unfortunately, it looks like another recession may be coming to knock us down just as we were getting back on our feet.
Experts have begun speculating about a looming economic crisis, sparked by the Dow tumbling, several countries on the brink of economic collapse, and the growing tensions caused by the trade war between the U.S. and China. But while there’s nothing that you can do to prevent America from once again wandering into a decade of financial instability, there are a few things you can do to make sure your family is prepared.
Build Your Emergency Fund
This one is the most obvious and probably the most important. When the economy begins to crumble, the best thing you can do is have money that isn’t tied up anywhere or else or could disappear if the market collapses. Plus, if you lose your job, an emergency fund helps protect your family from complete financial ruin. Typically, experts recommend having 3 to 6 months of living expenses saved. So if you’re nowhere close to that, you may want to start saving.
Pay Off Your Debt
Even if you are jobless and have no money, you will still need to pay off the debt you have or interest will accrue, digging you into a deeper financial hole. Plus, if your credit tanks as a result of credit card debt, that may end up hurting you during a recession.
Of course, if it was as simple as just deciding to pay off your debt, then everyone would be debt-free. Still, as terrible as it may be, you may need to really examine your debt and figure out what you can pay off in the short-term versus what will take time. You also may need to potentially take out a debt consolidation loan that will lower your interest rate.
Check Up on Your 401K
To be clear, nobody is saying to drain your 401K in preparation of a recession that hasn’t even happened yet. In fact, if you feel like you are in a financially stable enough, the best thing to do is most likely keeping things the way they are.
However, if you do feel like you may need some financial flexibility, re-examining your 401K may be a smart move, even if you are simply assessing if your portfolio is the right plan for you. Of course, make sure you speak with someone financially literate before making any rash decisions based on reading an article on the internet.