ATLANTA — With concerns about the economy right now, you’re probably hearing a lot about the chances of moving into a recession, but what does that mean for our personal finances?
While economists are watching shipping, everyday Americans are focusing on watching their spending.
A recession is generally defined as two financial quarters in a row, or six months in a row, of the economy shrinking, or pulling back.
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Abby Reed, Reed Financial Group Co-CEO, told Channel 2 Action News that “recessions are always called after the fact, after they start.”
This year, we’ve already had a financial quarter with negative growth, but the rush to import items before new tariffs proposed by President Donald Trump take effect is making the numbers hard to read.
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So, how can we recession-proof our personal finances?
Channel 2’s Linda Stouffer talked to Reed and Channel 2 Consumer Advisor Clark Howard to see what they recommend for protecting your finances.
Here are their recommendations:
Build an emergency fund
Reed coaches her clients to build an emergency fund. Usually, she recommends three to six months. But right now- she suggests saving six months worth of expenses.
“That’s going to catch you if you are laid off from your job -- so six months at least at this point is the goal,” Reed told Stouffer.
Look for accounts that will pay you interest on your savings, like high yield savings accounts. Bankrate lists rates today up to 4.45%. Start small and keep building.
Chip away at debt when you can
Check what your interest rates are. Reed said one strategy she likes- is to pay off the highest percentage interest rate accounts first.
Other advisors recommend tackling the highest balance first. Whatever strategy you choose- knock out debt.
If you need assistance, the National Foundation for Credit Counseling nonprofit may be able to help.
Evaluate your spending
Basically: Check those receipts! Reed said this is a great time to evaluate your spending. Even places you normally go for shopping, coffee or dinner, may be significantly higher now.
Look at your streaming services and other spending to see where you can save.
“Subscriptions that aren’t being used, cost potentially hundreds of dollars a month,” Reed said.
She also recommends you shop around for home, car and medical insurance. Compare costs, especially if you haven’t done that in a while.
Take care of yourself and your future
Howard said you’ll sleep better at night if you look out for your family now.
“Are we going to have a recession or not? Are we going see much higher prices or not? So this is a time that you do the things to make sure you are financially secure, to ride out the uncertainty going on right now,” Howard said.
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