Ways to Prepare for the 2023 Recession

While it is not something anyone is looking forward to, the likelihood that 2023 is going to bring an economic recession is looking more and more like a sure thing.

heading into a recession
Image by Mediamodifier from Pixabay

What is a recession?

A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in two successive quarters. In layman’s terms – the way I see it anyway – a recession is when you buy only the absolute necessities and you save anything else you are able to earn. Many people lose their jobs due to companies cutting back due to a decline in consumer spending, so having a good nest egg built up is crucial.

Just this week I was watching the news and saw Amazon is laying off about 10,000 employees. Meta laid off 11,000 people. Microsoft let go about 1,000 employees. Twitter has a staff of about 7,500 people they cut in half – and that was before they cut thousands of content-moderation contractors, when Elon Musk took over Twitter he fired 20 staffers because they expressed their dissatisfaction of him. (I smell a lawsuit there). About 86,700 tech jobs have been lost this year, and there will be more to come.

How can you tell when you’re in a recession?

Like we said earlier, industries produce less products/services for two consecutive quarters (6 months). Unemployment rates rise, housing prices drop, the stock market and other investments start to drop, and that raise you were hoping for doesn’t happen.

COVID-19 had a lot to do with our economy tanking. With the Federal Reserve raising interest rates to help slow the recession – in reality, it’s making it more difficult to just merely survive. It becomes even more difficult to obtain a car loan or a mortgage from a bank – which causes the housing and retail sectors to suffer. Credit card and student loan repayments increase and makes it more difficult for consumers to manage their day-to-day lives. Businesses cannot expand and many are forced to cut their workforce, which causes unemployment to rise.

So how do you protect yourself during a recession?

My parents were always frugal and would save all year long so that we would have a bunch of great camping trips during the summer months, or one big vacation that would last a week or more. They made it seem so effortless to save a little out of each paycheck to put towards our vacation fund. Unfortunately, with the drastic increase of using debit and/or credit cards versus cash (like my parents used), it can sometimes be a bit daunting on how to figure out how to put a portion of your paycheck away each pay period.

Get Rid of Your Credit Card Debt Now

Pay off your balance as quickly as you can. With interest rates rising quickly, this is super important. Did you know that you can also call your current credit card company and ask for an interest rate reduction? Believe it or not, approximately 70% of people who asked for one in the last year got one – but it’s a well-kept secret and too few people even bother to ask. My motto is, “the worst they can do is say no – so what have you got to lose?”

Start an Emergency Fund or Add More to It

The standard advice for an emergency fund is to have at least 3 months worth of income saved up in the event that you are laid off, get injured and cannot work, etc. When a recession hits, the rule of thumb is to have a year’s worth of savings or assets you can easily liquidate. If you pay off your credit card debt, continue making those payments into your emergency fund.

Other things you can do to expand your emergency fund include putting off any renovations that are not absolutely necessary, canceling a vacation and adding that money to your emergency fund, consider taking on a roommate or two to enable you to split the monthly household expenses and therefore free up additional funds to add to your emergency fund.

Finally, use an online calculator to help you adjust your savings to fit your current situation such as the ones at SavingsCalculator.org. Not only do they help you calculate your current savings, they can help you with a multitude of other calculations as well.

If You Don’t Use It, You Don’t Need It

84% of Americans think their home isn’t clean or organized enough. Why is that? Because, as Americans, we spend on average $18,000 a year on stuff we don’t need. Data from early in 2022 shows that 64% of Americans are living paycheck to paycheck in the current inflationary times.

My husband is a hoarder. He is constantly coming home with loads of this, that, and the other. Stuff we do not need but items he thinks will “come in handy” one day. Honestly, it drives me nuts, but my father was the same way. So if you need to declutter your home and get organized, one of the best ways to do so is to sell the excess – either by way of a yard sale, a pawn shop or a consignment shop. If they are household items that are still in good condition, you can contribute them to your local Goodwill store or sell them on any number of social media sites.

Another means of adding to your emergency fund is to obtain a home equity line of credit, or turn a hobby into a second job.

prepare for a potential job loss
Image by Gerd Altmann from Pixabay

Prepare for a Potential Job Loss

What are items that people use every day and cannot do without? Think toilet paper, hand sanitizer, laundry detergent, soap, etc. What types of services do people need every day that most could not do without? Companies that produce consumer staples, law firms, education services (including teachers and bus drivers and support staff), maintenance positions, health care services, warehousing, etc. are all services that most every individual will need on a regular basis.

Diversify Your Income

If you don’t have the skills to tackle one of the suggestions we just made, learn a new skill to help you swivel careers. The more you learn, the more you earn. Prepare in advance for a potential job loss if you are not currently working in a recession-proof field by brushing up on skills that would make you indispensable.

If your job is not in a recession-proof industry, do not relying on just once source of income. I work for a law firm, my husband is a maintenance supervisor at a local apartment community. I supplement my income by writing, taking surveys, testing products and my husband supplements his income by doing car repairs for those who need them and cannot afford to take their vehicle to a shop. We have what we call our “gig income” to add to our “regular income” to help us supplement our savings.

You can also find ways to cut other costs on things you may not even consider. Can you do without the Starbucks latte every morning? Can you pack a lunch three days a week instead of eating out every day? Maintain the vehicles you currently have in good working order to avoid having to purchase a new or new-to-you used vehicle. Clip coupons and start bargain shopping. One of my favorite TikTok personalities shows you how to save on pretty much everything – everywhere!

@torok.coupon.hunter

#MrCleanPartner I ran out of my favorite cleaning supplies so I dropped by my local @samsclub 🧼 Get $2 off the 16-ct Mr. Clean Magic Eraser Variety Pack until Nov 23rd, online and in-stores!

♬ original sound – Kiersti Torok

Keep Your Investments

The recession will NOT last forever. Even if your portfolio goes down in value each day – you will likely be selling at a loss if you liquidate everything. Switch your investments to industries that are recession-proof: consumer staples, utilities, health care and ride out the recession. Once the economy rights itself once again, you’re almost guaranteed to receive astronomical gains if you hang in there.

If you would like to learn more about how to prepare for a recession, check out the sources we used below for a more in-depth look into each of these areas.

Our Sources

  • How to Prepare for a Recession (Wealthy Single Mommy)
  • 7 Tips on How to Survive a Recession (Washington Post)
  • How to Survive a Recession Without Burning Through Savings and Selling Off Investments (Forbes)
  • Where Will the Thousands of Laid-Off Tech Workers Go? (Slate)
  • What Was the COVID-19 Recession? (The Street)
  • As inflation heats up, 64% of Americans are now living paycheck to paycheck (CNBC)
  • How Much Stuff Is In the Average American Home? (The Simplicity Habit)

Thank you for your time. If you enjoyed this article, please leave a comment below.

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