Almost half of U.S. chief financial officers believe a recession will strike the U.S. economy by the end of 2019, with the tight labor market and growing trade tensions driving economic jitters among corporate America. Additionally, more than 80% of U.S. CFOs think a recession will strike by the end of 2020, according to the Duke University/CFO Global Business Outlook survey released Wednesday. (source: wsj)
While there has been a significant amount of good news about the economy, the heightened market volatility, rising interest rates, and companies now having trouble to find and keep qualified employees has many people nervous. Not to mention the fact that it seems there isn’t a week that goes by where CNBC doesn’t have a scroll at the bottom saying, “Global Worries Send Markets Downward”.
We can never predict exactly when a recession will hit us, but here are five tips to prepare for a downturn in the economy.
Get your emergency reserve to 6 to 12 months of cash
- More possible layoffs/reorganizations- you should prepare that if your company might go through a layoff period or a complete restructuring of the company to cut cost. Ask yourself where you stand in the pecking order and if there is a possibility your department or division could be part of the reorganization.
- Lots of online banks now offering 2%- many online banks including Ally Bank, CIT Bank, etc. are offering savings accounts north of 2%. This could be a good place to store the excess emergency reserves until you see how your financial situation shakes out.
Pay off rising interest rate debt
- HELOC’s – Home Equity Lines Of Credit- not only are HELOC’s not tax deductible anymore, there’s a good chance your line of credit has topped north of 7%. Since you are not going to be able to find a guaranteed investment at that interest rate, it’s best to try to pay this down now.
- Credit Cards/Private student debt- with interest rates climbing higher and higher, you should read your student loan and credit card statements to see what interest rate you are paying. Some of these credit cards will now be charging you over 20% to finance the purchases that you made. This should be one of the first places to put your excess cash.
Get to the doctor early in the year
- If you have good health insurance, benefits- use it- you won’t really have any idea right now if you’ll be at an employer that has good insurance let alone insurance at all. If you are forced to the exchange, you might have health insurance that isn’t at the same level of what you have today or the network of doctors you use currently. Get your medical, dental, and vision appointments done early in the year.
Reassess The Risk Of Your Investments
- Could you withstand another 50% hit if the markets collapse? – how quickly we forget what happened in 2008. This is a good time to review your overall asset allocation.
- Should you start taking some profit on what you made the last 10 years? – it’s generally pretty easy to know when to buy investments, but it’s hard to know when to walk away from the table. This could be a great time to take some profit and grab some dinner while you wait to see what happens.
Get prepared to hit the job market
- Clean up your resume- if you need to start interviewing again or hiring a headhunter, it will be smart to have your resume professionally done and ready to go. Some of you haven’t done this in more than a decade.
- Build up your connections on LinkedIn- There is a cool Google Chrome extension called Dux-Soup that can help you maximize your connections on LinkedIn. Remember, it is about who you know not what you know if you need to get a job.
If you want to discuss the possibility of a recession happening and what financial moves to make, just hit me up at [email protected]