Learning Center
Inflation and an Economic Slowdown: A Double Whammy for your Finances
Newspapers and media reports have been filled with talk of inflation and recession. Experts are arguing about the definition of the latter. Pundits are pondering whether the slow down reflected in the latest consumer price index report means that inflation has peaked. You, in the meantime, are still staring in disbelief at the numbers that are rolling by as you fill your tank with gas or the total tally when you buy a few bags of groceries.
Are We in a Recession?
It really doesn’t matter what anyone calls the nation’s economic condition when you’re having trouble paying your household bills – or worrying that’s where you’ll find yourself soon. Though gas prices have been dropping steadily and retailers like Walmart, and Home Depot are reporting strong financial results, there is some concern that higher prices may be driving their gains, and there is only so long that consumers will be able to maintain their spending habits.
That diminished spending on goods and services is one of the top signs of recession, along with cuts in manufacturing and production, increases in unemployment, and stagnating or dropping income. As frightening as each of these elements sounds, it is when you personally experience a combination of them that you feel a real impact. The good news is that there are steps you can take to prepare.
Can You Recession-Proof Yourself?
Recessions impact everybody one way or another, but they are definitely more painful for those who aren’t prepared. Here are a few things that you can do to minimize the financial impact on your family:
Review your financial plan. If you have been investing, now is the time to take a look at your short- and long-term goals and weigh them against the potential of a shifting economy. If you have too much money in one particular investment, now might be a good time to diversify, and if you are anticipating needing to take a significant amount of cash out in the short term, it’s a good idea to make sure that your investments aren’t particularly vulnerable to market volatility.
Take a close look at your spending and make adjustments. We all give ourselves a bit of grace when it comes to our budgets, but if you have reason to believe that rising prices are going to do more than make you wince, now is a good time to analyze what you’re spending on and see what you can eliminate or cut down on. Refinancing loans, canceling subscriptions, and being a bit more frugal in your habits are just a few examples of things that can make a big difference.
Have a contingency plan, and the savings to back it up. Do you have an emergency savings fund? Is there enough in it? Most experts advise calculating your monthly expenses and then putting away at least three times that amount to carry you through a job loss or some other economic crisis.
Pay down debt. If you are carrying credit card debt, or have any other loans that are charging you high-interest rates, double down on paying them off. It may hurt to skip a luxury in favor of putting more into paying down your debt, but if you face a job cutback, you’ll be glad for every dollar less that you owe.
Find extra income. It may sound more easily said than done, but if you can find a way to earn some money on the side, it will cut into the impact that rising prices are having on your lifestyle – or help you pay down debt or boost your savings.
The good news is that most recessions end in less than a year. We’ve been here before and we’ll get through it again, but that doesn’t mean that it will be easy. If you need financial advice to help you navigate the challenge, contact our office today to set up an appointment.
NEVER MISS A STORY.
Sign up for our newsletters and get our articles delivered right to your inbox.
Rose Tax & Financial
Cedar Crest, New Mexico 87008
Sat: 10:00am to 2:00pm
Check the background of your financial professional on FINRA's BrokerCheck
Avantax affiliated Financial Professionals may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state. Securities offered through Avantax Investment Services℠, Member FINRA, SIPC, Investment Advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through an Avantax affiliated insurance agency. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. 972-870-6000.
The Avantax family of companies exclusively provide financial products and services through its financial representatives. Although Avantax Wealth Management® does not provide or supervise tax or accounting services, Avantax representatives may offer these services through their independent outside business. Content, links, and some material within this website may have been created by a third party for use by an Avantax affiliated representative. This content is for educational and informational purposes only and does not represent the views and opinions of Avantax Wealth Management® or its subsidiaries. Avantax Wealth Management® is not responsible for and does not control, adopt, or endorse any content contained on any third party website.
This information is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences.
For Important Information and Form CRS please visit https://www.avantax.com/disclosures.