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Financial experts offer tips to prepare for a recession

By agedleadstore
Financial experts offer tips to prepare for a recession Feature Image
3 minute read

Some economists are warning that a recession is looming due to high inflation.

Despite the Federal Reserve recently raising its funds rate another half percentage point on top of the quarter percentage point hike in March, some experts are saying it may be too little too late.

Other experts believe this move could actually cause a recession.

The upside, experts say, is that unlike the recession that was suddenly triggered at the start of the COVID-19 pandemic, consumers have some time to prepare.

Some analysts, including those at Goldman Sachs, believe a recession is more likely to occur in 2023 than this year.

The Fed hopes that its efforts to curb inflation with more rate hikes will do the trick, resulting in a “soft landing” where demand loosens and the risks of a recession fade away.

But experts say historically speaking, it has been difficult for the Fed to find this balance in time to stop a recession from occurring.

While a recession isn’t guaranteed, experts are trying to help consumers take steps now to help them cruise through it if it does happen.

Financial experts suggest consumers focus on paying down high-interest debts, such as credit cards, rather than low-interest loans such as mortgages.

But if consumers want to focus on paying down their mortgages, that wouldn’t hurt, either. Losing the burden of a monthly mortgage payment certainly has its benefits, experts say, especially during a recession.

JPMorgan Chase CEO Jamie Dimon said that although he believes the Fed should have moved sooner to raise interest rates, the U.S. economy is strong right now, and consumers are in great shape.

The Goldman Sachs analysts also say strong consumer demand could help the Fed achieve the soft landing they are hoping for.

This demand is particularly strong in the housing industry, where competition remains despite rising mortgage rates and low inventory.

The rising rates also may be contributing to heightened demand, because buyers want to make a purchase immediately with current rates before they get any higher.

Financial experts say purchasing a home is one of the most important investments in a person’s life, so it’s difficult to say there’s ever a “wrong” time to do it.

The most important thing is for the individual buyer to have their finances in a strong place, where they have paid down their debts as much as possible, and have enough savings to make an adequate down payment plus an emergency fund.

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