With inflation showing little signs of slowing, Credit One Bank provides helpful advice on how to recession-proof your finances. Fears of a recession make now the ideal time to assess your financial health – here’s how:
Credit One Offers Tips to Recession-Proof Finances
Despite the Federal Reserve continuing to raise interest rates, inflation shows little signs of slowing, leading to fears of an impending recession. For most consumers, now is the ideal time to evaluate their financial well-being, including savings, access to credit, and debt.
“Reduced income is the greatest impact a recession can have on most consumers. Income could be reduced due to job loss, fewer assigned hours, lower commissions, fewer bonuses, or lessened investment income,” said David Herpers, Sr. Vice President of Digital Bank at Credit One Bank. “With the Fed indicating it will continue its largest interest rate hikes since the 1980s, there are savings and credit tips consumers should be taking advantage of today to prepare themselves for the unknown.”
How to Recession-Proof Your Finances
Recession-proofing your finances is a straightforward process that includes reducing fixed expenses, increasing your savings, and gaining access to additional credit if needed. Having the extra cash by canceling things that aren’t essential can add up to more than you might think. Take a close look at your monthly subscriptions or memberships to determine if they are necessary or just a “nice-to-have.”
Also, check that your savings accounts are working hard – and not just storing money in a low-yield account. Check out if your bank offers a high-yield bank account. These accounts can offer an APY (Annual Percentage Yield) of around 2% vs. the national average of 0.1%.
A rule of thumb is to have six months of income tucked away in savings available to access in times of need. Make sure to tuck part of your monthly paycheck into a personal savings account, not just a 401k or a 529 account.
Access New or Additional Credit
If you are stably employed, now might be the best time to access new credit. Having the extra opportunity for quick and available credit becomes increasingly crucial in the case of job loss, income reduction, or unexpected costs. As fears of recession loom, act now by adding another credit card to your wallet, guaranteeing flexibility in the future.
Evaluate Your Debt(s)
Knowing the interest, you pay on your loans is essential to making smarter financial decisions. Check the APR on student loans, car payments, mortgages, and individual credit. As interest rates go up, the cost of borrowing follows. If you’re on any variable-rate loan, you might be able to lock in fixed rates for the future. Refinancing may offer more money back in your pocket and lower monthly payments.
Practicing good habits now will give you flexibility and confidence with your finances as talk of a recession and interest rate hikes intensify. Whether it is gaining access to additional credit through credit cards, refinancing a loan, or simply looking a little deeper at your current spending, recession-proofing your finances is possible for the everyday consumer
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