Lately economists have been warning that we may be heading for a recession in the next one to two years. Goldman Sachs recently estimated that the chances of the US entering a recession is about 35%. I knew that a recession was likely on the horizon in the next few years. But I didn’t expect it to be a possibility so soon.
Economists can’t predict the future with 100% accuracy, so the economic downturn they’re predicting might not happen. I know it’s too soon to start getting worried. However, I have to admit I’ve been a bit anxious about my finances because of these headlines.
If a recession is coming, there are definitely a few things I want to shore up before it hits. I bet you may be feeling the same way about your own finances. To help you figure out how to best prepare, here are some of the steps I’m taking to get ready for a potential recession.
Beefing Up My Emergency Fund
A lot of the articles I’ve been reading have said the potential recession that’s headed our way won’t be as bad as 2008. However, I still want to beef up my emergency fund in case my partner gets laid off or my freelance writing business tanks. I usually like to have a one-year emergency fund socked away, but my savings have taken a hit in the past couple of months.
Right now I only have about six months of expenses in my rainy day fund. So I want to get that back up to at least a year as soon as possible. You never know how long it will take to find another job if you get laid off during a recession. If you’re unemployed for a long stretch of time or you have to take a paycut, having a large emergency fund to fall back on will give you some peace of mind during a turbulent time.
Buying a Second House
It probably seems counterintuitive to buy a second home and take on more debt before a recession. But my partner and I live in a vacation town that fared pretty well during the Great Recession. Because it’s an affordable destination, people came here for a weekend getaway when they couldn’t travel to far-flung places in the aftermath of 2008. That’s why we think buying a second home and renting it out on Airbnb could be a decent financial move to prepare for a potential recession.
We’re hoping to buy a small house with a very low price tag in the $40,000 range. I’m planning to pay this cabin off aggressively so we don’t have to carry another mortgage during a downturn.
If we lost our jobs and ran through our emergency fund, we’d be able to move into this smaller, paid off house instead of renting it out. We’re hoping that doesn’t happen and we’ll be able to ride out the recession with our jobs intact. But it’s always good to plan for the worst-case scenario and figure out what you’d do to reduce your bills if you experienced extended unemployment.
Food is another one of the basics you need to figure out how to cover if you lose your job during a recession. Luckily there are lots of foods with long shelf lives that you can stockpile now to get ready.
Commercially canned goods can last for about five years if they don’t have any dings or dents and are stored in a cool, dry place. Keep in mind that canned fruits and tomato products usually expire faster because they’re acidic. So make sure to eat those within a year or two.
Grains like oatmeal, rice, and pasta can also last for a few years if properly stored. Dry beans and lentils are a great source of protein and are shelf stable too. Although rice and beans isn’t the most exciting meal, you can stockpile seasonings and long-lasting condiments like soy sauce and maple syrup to add some pizzazz to your meals.
What are you doing to prepare for a potential, upcoming recession? Let me know in the comments section below!
Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.