It is worth taking this to heart.
- Today’s economic conditions are challenging on many levels.
- Financial expert Suze Orman has some solid advice on how to get through these tough times.
- Cutting back on your spending and rethinking your emergency fund can go a long way towards improving your financial situation.
Two years ago, the US economy was obviously in bad shape. Unemployment was rife, small businesses were shuttered across the country and stocks struggled to claw their way out of a recent slump.
Fast forward to the present and things look a little different. Not only are there plenty of jobs, many companies are desperate for employees, so much so that they put higher wages in workers’ path to lure them.
But while the unemployment rate is now significantly lower than it was two years ago, many Americans are in a comparable position financially, struggling to keep up with their bills. Instead of being held back by unemployment, consumers are now struggling to cope with their rising cost of living. And while we’ve seen decent wage growth since the pandemic began, at this point even workers whose incomes have risen cannot keep up with inflation.
The problem is currently being exacerbated by months of stock market volatility and a recent sharp plunge that sent the S&P 500 index briefly bearish, marking a 20% decline. The S&P 500 is widely regarded as an indicator of how the stock market as a whole is performing. And nowadays that can be summed up as “not good”.
Not only have stocks fallen while the cost of living has risen, but many financial experts are warning of an impending recession. And financial guru Suze Orman agrees. On a recent podcast, Orman said she expects a recession to hit later this year or in early 2023. And with that in mind, here are three key money moves she would advise everyone to make right now.
1. Reduce your expenses
Many people plunder their savings and take on expensive debt to keep up with inflation. But it’s a move that could do a lot of damage to consumers if a recession hits.
Layoffs can be rampant during a recession, so you need to save as much as you can to make ends meet in the event of a job loss. So the last thing you should do right now is use your savings to cover your bills. Instead, Orman says now is the time to cut spending to save money. Look at your expenses and figure out which ones you can spend less on — even if it means making some short-term sacrifices.
2. Reconsider your emergency fund
Many people have emergency savings to deal with unexpected bills or times of financial upheaval like a layoff. Orman says having up to a year of living expenses in the bank is a smart move. However, you may have initially calculated your emergency fund based on what your bills cost you a year ago.
With the cost of living soaring at the moment, a recalculation may be in order. And based on that, you may need to make an effort to increase your emergency fund should your personal financial situation deteriorate in the short term.
3. Find a high-yielding savings account to store your accumulated cash
Investing money that you may need within a few years is never a good idea. And your emergency fund falls into that category.
Still, it pays to earn as much interest on your money as possible, so Orman says to do your research and find a savings account that gives you a generous rate of interest on your money. Even though savings account interest isn’t much fancy these days, there is are some better options out there
We are dealing with difficult economic times, although unemployment rates are low. And since we don’t know how quickly a recession will hit, it’s best to do as much as possible to be prepared. It’s wise to take Orman’s advice and reconsider your spending, shore up your savings and find a good home for your money. That should give you more peace of mind at a time when a recession is looming.
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