Prices for gas, food and rent are soaring. The Federal Reserve has raised interest rates to the highest level since 2018. The U.S. economy has shrunk for two straight quarters. Economists are divided over whether a recession is looming. What’s clear is that economic uncertainty isn’t going away anytime soon. But there are steps you can take now to be ready for whatever is ahead. Yiming Ma, an assistant professor at Columbia University, says it’s not a question of if but when a recession will happen. People should prepare but not panic, she said. “Historically the economy has always been going up and down,” said Ma. “It’s something that just happens, it’s a bit like catching a cold.” But, she notes, some people’s immune systems are better able to recover than others. It’s the same with finances. If you think a recession could destabilize yours, here are some things you can do to prepare. KNOW YOUR EXPENSES AND MAKE A BUDGET Knowing how much you spend every month is key. Ma recommends sitting down and writing how much you spend day-to-day. This will help you see what’s coming in, what’s going out, and which unnecessary expenses you might be able to cut. “By understanding what money you are getting and what you are spending, you may be able to make changes to help you through tough times,” advises the Federal Deposit Insurance Corporation’s Money Smart, a financial education program. Budgets often reveal expenses that can be eliminated entirely or impulsive spending that can be avoided with planning. For guidance creating a budget, free courses such as “ Creating a budget (and sticking to it) ” by CT Dollars and Sense, a partnership of Connecticut state agencies, and Nerd Wallet’s Budget Calculator can be good places to start. SAVE AS YOU CAN The more non-essential expenses you can cut, the more you can save. It’s not possible for everyone, but Gene Natali, cofounder of Troutwood, an app that helps people create financial plans, says it’s ideal to budget to save enough to cover basic necessities for three to six months. Programs such as America Saves, a non-profit campaign by the Consumer Federation of America, can help create a roadmap. And if you do have a savings account, it’s important to check whether your bank gives you a good interest rate and shop around if it doesn’t, Ma said. Her advice is to keep an eye on the monthly fees or service charges that might eat into your savings. But don’t limit your options. Online banks sometimes offer better rates than traditional ones. CONSOLIDATE YOUR LOANS, AND DON’T TAKE ANY MORE As interest rates rise, experts recommend that you consolidate your loans to have just one fixed-rate loan and, if you can, pay down as much of your debt as possible. “Job security tends to be worse when a recession comes, it’s not a great time to accumulate debt,” said Ma. But paying off your existing debt is easier said than done. The Federal Trade Commission’s Consumer Advice guide for Getting Out of Debt can help you make a plan. With interest rates high, it’s also not a great time to take out new loans for big expenses like cars, though experts do recommend that if you need durable goods such as […]

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