Political and economic pundits love to predict when the next recession is going to hit. In reality, economic transitions impact people differently. What we do know with some certainty is that recessions often lead to job losses. Losing your job suddenly can have substantial emotional and financial consequences.
While we never know when recessions and unemployment will hit, we know they will. Think preparing for this like carrying an umbrella on a day when the sky is filled with clouds. You will be ready whether it rains or not.
Areas of opportunity
- Emergency Funds
- How are your emergency funds? Should you work to increase this? We generally recommend clients maintain 3-6 months of cash reserves.
- Review your budget. Know the difference between needs and wants. Identify where you can cut back or cut out expenses, if needed.
- Health Insurance
- Be aware of Affordable Care Act (ACA) health plans, and premium subsidy rules.
- Know your rights under COBRA rules, the federal laws that protect employees covered by employer health plans.
- Reduce “bad” debt like credit card balances and 401(k) loans.
- Consider an envelope system or debit cards to manage monthly expenses and prevent yourself from accumulating credit card debt.
- Have a home equity line of credit (HELOC) in place to use as a backup emergency fund. Don’t use a HELOC to pay for vacation and other fun stuff.
- Consider your current financial resoures and future needs. Evaluate whether you need to continue to work.
- Do you have any Roth accounts? This can provide access to tax-free dollars?
- While less desirable, you may also evaluate if you can tap into a 401(k) or IRA penalty-free.
- Consider claiming Social Security as a lifeline if you are age 62 or older.
- ABCs - Always Be Curious
- Keep your professional tools up to date - resumes, cover letters, professional profiles like LinkedIn.
- Research educational programs or certifications to enhance or diversify your skillset.
- Explore online courses, workshops, or seminars to enhance your marketability.
- Consider career counseling or coaching services for guidance.
- Reach out to professional contacts, mentors, alumni networks, and former colleages for support and advice.
Economic clouds are forming in the skies, but it is hard to say if we will have passing showers, or worse, an economic storm. These challenges are part of the journey to financial success. The good news is you don’t need to know…just be prepared. Download our 2024 · WHAT ISSUES SHOULD I CONSIDER IF I LOSE MY JOB? with tips on what to do if storm clouds form in your financial life.