Preparing your finances in case of recession

PHOENIX (3TV/CBS 5) — So far, we’ve managed to avoid a recession despite high inflation. But if things change and we do slip into a recession, there are steps you can take to protect your finances.

Recession fears have been on the rise since the COVID-19 pandemic turned the world upside down. It led to President Joe Biden’s plan to provide direct relief with the American Rescue Plan. “It helped us in the short term,” said Marcus Warren, a financial manager. “There was a lot of money that was pumped into the economy during the pandemic.”

People had money to spend and money to save. Then COVID restrictions loosened, and life began to return to some normalcy. That spending kept a recession at bay. But now, persistent inflation, high gas prices and higher interest rates have consumers holding on to more of their money. “We’re seeing consumer spending start to slow and consumer spending is 70 percent of economic growth,” Warren said.

According to a summer survey, rejection rates for credit applications have increased sharply in the last few months — especially for people with lower credit ratings. Loan approvals and spending are now slowing. “When that tends to slow down, that’s when you can see a recession,” Warren said. Instead of panicking, Warren suggests recession-proofing your life as much as possible. “You need to make sure that your saving is still high,” he said. “That you at least have that emergency fund.”

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