It's fair to say the U.S. economy is in a strange place. On the one hand, jobs are plentiful and companies are even raising wages in an effort to hire. On the other hand, inflation is forcing many consumers to make hard choices and rack up debt just to make ends meet.
Between that, the Ukraine conflict, and the Federal Reserve's planned interest rate hikes, J.P. Morgan CEO Jamie Dimon thinks we're headed into a period of economic choppiness. In fact, he thinks we're not so far away from an economic "hurricane."
Why economic conditions could worsen
Even though many households are squeezed financially right now due to inflation, consumers are still spending at a decent pace. But that could change as the Fed moves forward with rate hikes and borrowing gets more expensive. Once that happens, consumers might start cutting their spending. And that could fuel a period of layoffs, lower wages, and sluggish job growth.
Or, to put it another way, we could be looking at an economic recession in the not-so-distant future. And that's something all consumers should really start thinking about and gearing up for.
How to weather the storm
We can't say with absolute certainty that a recession (or economic hurricane) will hit later this year or early next. But there's enough reason to believe that could happen. And so it's important to prepare for that possibility.
One of the best ways to do so is to shore up your emergency fund. If you don't have enough money in your savings account to cover three full months of living expenses, make an effort to reach that threshold, whether by cutting back on spending or boosting your income with a second job. And if you have enough cash on hand to cover three months of bills, consider ramping up your savings so you're able to cover five or six months' worth.
At the same time, it definitely pays to try to eliminate any debt you have with a variable interest rate attached to it. That's a wise thing to do in light of the aforementioned rate hikes. But also, if economic conditions sour and you wind up losing your job, the last thing you need is a series of costly debt payments hanging over your head.
Plus, if you work in an industry that could take a hit during a recession, then you may want to consider spending some time boosting your job skills. The more value you add to your company, the less likely you'll be to wind up on the chopping block if your employer is forced to downsize its staff. And even if you do lose your job in that scenario, the more skills you have, the easier it should be to find a new job once things open up.
Keep calm and prepare
There's no need to start losing sleep over an impending economic storm. But should you make an effort to prepare for a downturn? Absolutely. Doing so could actually bring you peace of mind, and that alone makes it worth the effort.
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