Recession Survival Guide — 2022 Edition
Plan for the worst, hope for the best. Free budgeting tool included!
You: “Technically, this is now a recession.”
Your bank: “Great insight. Your house is in foreclosure.”
What matters is the basket of indicators that should give us pause, like a runaway inflation rate, rising interest rates, and the fact that people willingly watch this show — all of which should compel you to plan for leaner days ahead. Lucky for you, I’ve put together The Definitive Recession Survival Guide. I put “definitive” in the title, so you know it’s legitimate.
Build Up Your Emergency Fund
Most financial experts agree that your emergency fund should be able to cover three to six months’ worth of expenses. In a recent Q&A, Ellevest pointed out that emergency funds take precedence over long-term financial goals, like investing in your retirement funds, during a down economy. The only thing more important than building up your emergency fund right now is the next tip.
Pay Down Debt
Prioritize paying off debt with interest rates higher than 10%. High-interest debt will hamper your ability to augment that critical emergency fund. If your debt is too high to pay off in the near-to-medium term, consider taking measures to mitigate extortionate monthly payments, such as executing a credit card balance transfer. A balance transfer does require solid credit, but there are other ways to consolidate debt, including a home equity loan.
Invest in High-Yield Savings
Last week, the Fed raised interest rates for the fourth time this year in an effort to curb inflation. The bad news is auto loans, mortgages and other loans may get more expensive. The good news is you’ll probably get a better return on your high-yield savings account. This could be a good way to prop up your emergency fund. Don’t have high-yield savings? Here’s a list of a few to consider.
Online Banking Audit
Do a deep dive on your checking account and credit card statements. Look back several months and seek out anomalies. If you don’t review your statements regularly, you might be surprised to find some errant charges (dispute those) and recurring subscriptions you forget about (cancel them). Take a hard look at any other recurring charges that aren’t worth it. Do you really need Showtime? You haven’t watched anything since Billions.
Subscribe to 401 Que? to gain access to the budgeting tool below. (Just kidding, you can just go get it, but a sub would be nice!)
Create a Budget
This is related to the online banking audit. As you encounter dead weight in your online audit, think about your budget. What are the essentials? What can you live without? If you already have a budget, consider reassessing in the context of a tightening economy. Get aggressive.
Don’t know where to start? Here’s a free budgeting template created by Jennifer Welsh.
Cozy Up to Your Boss
Not, like, in a weird way, but this is the time to show your boss why you’re an asset. Be proactive. Volunteer yourself for that extra project. Be visible. If you’re working remotely, make it a point to schedule Zoom calls with your manager. Communicate what you’re working on and be vocal about your wins. If you have the opportunity to work from the office (and if you feel comfortable), visit the office and meet with your coworkers. Prove that you’re an integral part of the team. Do good work.
Quit Your Job
Don’t cozy up to your boss if they’re an asshole. If you’re in an unrewarding or toxic working environment, consider making a jump now. You may not be able to later if the job market cools down. Also, if you've been working in an environment that isn’t right for you, there’s a good chance you aren’t valued highly enough as an employee to protect you from downturn-related layoffs. Now’s the time to find a better situation.
Cultivate Your Network Now
Asking a favor of someone you haven’t spoken with in years is not only poor form but ineffective. Reach out to people now, including people who can’t possibly help you. Offer your services. Offer your help. Be a facilitator. Connect people with one another. If someone’s looking for a job, connect them with a recruiter you know. If a company’s looking for a graphic designer, point them to a former colleague. Be active on LinkedIn. Post regularly. Comment regularly. Networking is not about current opportunities. It’s about future ones.
AI-Proof Your Resume
It’s not enough to update your résumé anymore. You have to AI-proof it. Artificial intelligence does the heavy lifting of that initial sorting of résumés for most big companies these days. The problem is AI isn’t perfect. It’ll miss clues that are obvious to humans. Fortunately, there are ways to optimize your résumé so that it isn’t prematurely dismissed by AI, which includes using a standard résumé format and utilizing keywords.
Can’t Knock the (Side) Hustle
A side hustle can be a good way to supplement your income, but it usually takes a while to gain momentum. To be able to benefit from it later, you need to start ramping up now. If you’re a developer, designer or writer, you might try your hand at Toptal, Fiverr or Upwork. You’ll need to create an online profile complete with an eye-catching portfolio. If you’re handy, you might offer your furniture-building services through TaskRabbit, though it could take you a while to attract customers. You could also try Uber or Lyft, but that’ll have a learning curve too. Prime the side-hustle pump now.
I don’t know if we’re in a recession, when we’re going to be in a recession, or how long we’re going to be in a recession, but I do know this: planning for a recession when there isn’t one is infinitely better than not planning for a recession when there is one. Happy planning!
Fantastic (and practical) stuff as always! Time for me to research high yield savings account.
Wow, this was my first time reading a financial advice and I feel quite good about myself right now! You just made me realize I am better than I thought, and also somewhat prepared to this recession. Cheers!