Economic headlines have been a bit scary lately. Housing sales are down, interest rates are up, stocks are down, inflation is way up.

The labor market has been pretty darn good for those willing to work hard. Many have quit and moved on to a better job with higher pay. Is it time to take a step back, take a breath, and look at the bigger picture?

Like the weather, forecasts abound for the economy. According to the Conference Board, the latest economic forecast for the US economy is a recession will start before the end of the year.

What steps can you take now to prepare for a downturn in the economy?

Start with an emergency savings account.

Many financial planners will advise that you should have three to six months’ worth of expenses in a savings account. But if you don’t, you’re not alone because 40% of Americans don’t have enough money to cover three months of expenses if they lost their primary job according to a survey by the Federal Reserve in 2021.

Don’t have a budget? Make one.

Make a budget and be realistic about how much you spend. Living within you means is the first step after making a budget. Do you really need that double latte at Starbucks? Even shaving $20 per week can add up fast.

Review your monthly subscriptions and be honest with yourself about which ones you really use frequently. Netflix, Amazon Prime, Spotify, and other services can creep up on you, especially the ones you tried with a 30-day trial and just plain forgot to cancel it.

Stock up on canned goods or longer shelf-life foods especially if you see a bargain. Not saying go hog wild on this idea but having a cushion on food while you are still employed can make the stress level go down if you lose your job.

Take a look at your credit card debt. Don’t have any? Kudos to you!

But if you do have some cards with balances, there are two ways to attack the balances.

You can try to pay off the highest interest rate one first. However, that may not feel great if it is the one with the biggest balance. Some people feel better if they can pay off the card with the smallest balance first. Getting a balance to zero and cutting that card up for good can be a great feeling of accomplishment. Then you can work on the next one and the next one. But keep in mind, you will save more money on interest charges by paying off the card with the highest interest rate first.

It may sound crazy, but if you are contributing to a 401k retirement plan at work, look at suspending your contributions until you get a handle on your credit cards and other high interest loan payments. Paying 18% on a credit card makes no sense even when compared to the “free” money company match on your 401k.

If you have questions about how to best manage your investments and more importantly, how to manage your risk relative to your financial goals, please give me a call at 480-330-4878. I am a fiduciary. I act in your best interest. I am a fee only investment advisor. No commission sales. No minimum investment balance necessary. I work with all investors young and old no matter how much money they have.

Brad Singer, CFA is a local financial advisor and is owner of Vail Financial Advisors, a Registered Investment Advisor in the state of Arizona. This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

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