5 Money Moves Every Millennial Should Make to Prepare and Thrive In A Recession
Add your caption
By: GenM Staff Writer Original: 05/08/2023
With inflation in the US reaching 40-year highs in 2022, the Federal Reserve is making efforts to counter it without causing a recession. Despite measures taken to curb inflation, it has remained above 8%, leaving people unsure of how the economy will respond. While experts have yet to officially declare a recession, it's always better to prepare before it happens. The millennial generation has demonstrated resilience in the face of economic challenges before and is well-positioned to overcome this one as well. By taking prompt action and appropriate measures, we can weather the storm and come out stronger.
What is a Recession?
A recession is typically defined as a decline in a country's GDP for two consecutive quarters. While the US experienced a decline in GDP during the first and second quarters of 2022, the official declaration of a recession never came. The third quarter saw a rise of 2.6%, exceeding expectations, but this only adds to the confusion. Regardless of whether a recession is officially declared, it is clear that the economy is facing multiple pressures. As the saying goes, it's better to err on the side of caution and prepare for any possible economic downturn.
What Happens in a Recession?
No two recessions are ever the same, but some of the classic economic impacts will rear their heads no matter how or when a recession happens. Following a time of rapid spending, a recession often causes people to spend less money, choosing to save it for the rainy days ahead instead. This lower spending means that companies and businesses of all sizes have lower revenue numbers, so they start to cut costs to keep their profits healthy. Unfortunately, these cost-cutting measures can lead to layoffs and job eliminations, leaving people to struggle even more.
Currently, there is a significant shift occurring in the housing market, as it transitions from a period of growth to a potentially severe downturn. In mid-2022, a buying frenzy ensued, causing intense competition and an increase in housing prices. However, with mortgage rates currently at multi-year highs, it is likely that the housing market will cool down, leading to a decrease in home purchases. Although this may help alleviate inflation, there is a risk of new homeowners defaulting on their mortgage payments, which could further strain the housing market.
Even though a recession has not been officially declared, the stock market has suffered multiple setbacks this year, resulting in what is known as a bear market. It is a typical pattern during a recession, as companies face challenges in meeting quarterly targets, causing stock prices to decline. This causes fear among investors, leading some to withdraw their investments, which exacerbates the overall market decline. Although the stock market is not immune to recessions, it has historically recovered over time.
Are We Expecting a Recession Between Now and the end of 2023?
Despite the lack of a clear consensus, the possibility of a recession looms large and declaring one outright could trigger widespread panic. The Bloomberg Economic Forecast from October has put the likelihood of a recession at 100%, indicating a high probability of an impending economic downturn. While an absolute prediction may seem far-fetched, the trend is becoming increasingly evident: it is more probable that we will experience a recession than evade one. This underscores the importance of preparing for the worst-case scenario.
How Do You Prepare for a Recession?
Since a recession can impact nearly every aspect of your personal and financial life, there are many different ways to prepare. If you’re not sure where to start, below are a handful of recommendations that can help make you and your finances recession-proof:
Invest In Self Care
Based on Forbes' analysis, modern recessions typically endure for 10 months, implying that if one occurs, it will be more of a long-term challenge than a quick fix. In addition to maintaining financial stability, it is essential to prioritize your physical and mental well-being. Consider establishing a regular exercise routine, learning how to cook healthy meals (which can also save you money!), and connecting with your loved ones. Taking steps to promote your overall well-being is a wise investment in the face of an economic downturn.
Stay On Your Game Professionally
No one wants to consider the fact that their job security could be taken away, but that is a very real side effect of recessions. To stay on top of it and maintain your peace of mind, sit down to update your resume. It’s also not a bad idea to stay connected with your existing professional network or reconnect with contacts you may not have talked to in a while.
Save Strategically
Living below your means is a great way to increase your savings amount. Instead of getting your nails done or seeing a movie on the weekend, opt for watching at home or doing your own nails. These small actions will allow you to put more money into savings and create an emergency fund. Your emergency fund should cover 3-6 months of your expenses, whether it’s for your personal or business use.
Minimize Monthly Payments
Take a critical look at your subscriptions/memberships and consider where you can cut back. While individual fees may seem small (such as $8.99 or $13.99) they can accumulate over time and gradually erode your financial security. Do you really require a third streaming service or a monthly beauty box from your favorite brand? Prioritizing your expenses and eliminating unnecessary subscriptions can help you save money and bolster your financial safety net.
Launch a Side Gig
Side gigs can take time to grow, so start yours today! Even a small stream of additional income every month can turn into a saving grace during a recession. You can make a side gig around literally anything – write blogs (AI/Chat GPT is your friend), help manage social media accounts, sell t-shirts, or offer consulting services! The hustle is worth it, and your bank account will thank you.
Taking Action Today
If you’re still feeling overwhelmed by the possibility of a recession, take these three simple steps:
1. Save an extra $50 a month. If you can do more, then do it.
2. Cancel one monthly subscription.
3. Open an investment account. Times of market dips are wonderful buying opportunities if you have the means.
As millennials, we have weathered tough economic times before and come out on top. Now, with the possibility of another financial storm on the horizon, it's time to be proactive. Share this article with your friends directly or via social media so that you can navigate the uncertainty together. Always remember that regardless of the circumstances, you are more than capable of achieving your financial goals. What actions will you take first to secure your financial future?
At Generation Mastermind, we seek to inspire you and help you grow in your career, life, and business. If you like this post, share it on Facebook, Twitter, LinkedIn, and other social media platforms. And don’t forget to add your comments below to tell me what you think.
“Creatively educating, inspiring, and connecting with today’s dreamers and tomorrow’s leaders.”
-Andrew3000
Follow us on
IG: @iamdrew3000 | generation_mastermind
Facebook: Andrew Amaechi | Generation Mastermind
LinkedIN: Andrew Amaechi | Generation Mastermind