John Chatzky
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Like many Americans, you may be worried about a possible recession.
Admittedly, predictions about whether we’re headed for a recession vary among Wall Street analysts. However, most consumers are convinced that one is on the way, two separate investigations of Morning Consultation/CNBC and ExpandMoney found.
Still, whether a downturn happens or not, it’s important to keep things in perspective, said personal finance expert Jean Chatzky.
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“Being in a recession is just something that’s going to happen once in a while,” said Chatzky, “HerMoney” podcast host and CEO of HerMoney.com.
A recession is defined as a significant decline in economic activity that extends throughout the economy and lasts for more than a few months.
“The thing you need to focus on is not the economy, but your personal economy,” she advised.
This can be easier said than done, especially when it comes to price increase on everything from gas to food and housing. The consumer price index, which measures common goods and services, jumped 9.1% year-over-year in June, according to the latest Bureau of Labor Statistics figures.
Still, being prepared ahead of time can help you weather any downturn.
Focus on “smaller, bigger goals”
To consolidate your finances, Chatzky advises you to start by answering the following questions:
- Are you spending less than you bring in?
- Are you saving at a constant rate?
- Are you capturing all available matching dollars from your employer in your 401(k) plan?
- Are you putting money into your health savings account and taking advantage of employer incentives to do so?
- Are you true to your investment philosophy? Do you have an investment philosophy?
- Have you calculated how much you will spend in retirement?
- Are you actually working to raise enough money to do the things you want in retirement?
“These are all much smaller and bigger goals that you can put into play no matter what the economy is doing around you,” said Chatzky, author of “How to Money.”
Set aside enough emergency savings
These goals should also include enough savings to cover at least three to six months of fixed expenses — aim for closer to six months if you’re a one-income family and three if you’re a two-income family, she said.
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This view is consistent with the advice of most financial experts. However, some, like the host of the “Women & Money” podcast Suze Orman, think you should have eight to 12 months saved for an emergency.
On the career side, make sure your resume is ready and you have an up-to-date network, Chatzky said.
“If you have the right pieces in place… you’ll be able to weather this much better than if you were just shaking in your boots because the headlines are telling you a recession is either coming or already here,” says -she.
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