Are You Financially Prepared For A Recession?

If you fear a possible recession on the horizon, you can take some financial measures to protect yourself.

A report made by the National Retail Federation revealed that the proposed new tax levy would cost $4.4 billion in clothing, $3.7 billion in toys, $2.5 billion in footwear, and $1.6 billion for household appliances. This amounts to about $800 for the average American family, according to a report by Oxford Economics.

Be a smart consumer:

• Determine the number of paper staples you will need (paper towels, diapers, frozen foods, toilet paper) to spend the rest of the year and build up stocks before prices go up.
• Talk to your family about the costs and how they affect your household budget.
• Create your own Christmas lists now and buy them first. Do not wait too long to buy toys like Barbies, Legos, or even a new pair of shoes.
• Take the family on vacation instead of buying too many presents for these holidays. It's your chance to focus on the experiences of material goods. If your budget is limited, take a trip or somewhere local; If not, look for your holiday deals.
• Do not expect to buy an expensive item. If you know that you need a new car, a new computer or a new smartphone, consider buying it before raising rates.
• Update your resume and profile and collect confirmation from those you work with. In times of recession, many companies are forced to downsize. If your family depends mainly on your income, be prepared. In the meantime, consider becoming a freelancer or do additional work to increase your cash flow and savings. Rent out the other room in your house; sell items that are no longer needed, find creative ways to save money.
• Reduce your expenses if you are a two-income family to see if you can live with an income for a month or two.
• Check your budget to determine where you can save money. 
• Check your wallet and start using or selling unnecessary gift cards that you collect. During the financial difficulties, you will see companies like Forever 21, which announced this week its intention to file for bankruptcy. If a company fails, these gift cards in the store can quickly lose value.

Be a wise investor:

Take the time to review your finances. Talk to a professional. This can be your financial advisor, your accountant, your 401k workplace provider, or another person for whom you can seek financial advice.

• Check if your investments stay aligned with your risk tolerance and investment schedule. For example, if you are about to retire or send your child to university within the next 12 to 18 months, you should reconsider your risk tolerance.
• Ask for a second opinion; many consultants will provide a first complimentary consultation.
• Rebalance your investment portfolio if you want to reduce your risk. If your time horizon is long, you know the stock market, its volatility, and consider using a trader to help you stay informed and invested.
• 2. Save enough for your emergency fund. For most people, they spend three to six months. If you have children or other dependents, you may need it.
• Payment of debts. This helps you out of the credit if you need money for an emergency.
• Review the request to increase the credit limits of the business loan or equity loan application. Please understand that this money should only be used as a last resort.
• Stay firm with your investments, but stay informed. Investment is a long-term process that demands willingness and patience and not to let emotions guide investment decisions.
• Keep the money aside, and do not rush to buy when the market goes down. Wait for signs of global market stability before spending more money on the job.

It is wise to consider warnings that a recession may occur. Here are some things to keep in mind:

• One of Wall Street's favorite indicators of an imminent recession, the distribution of Treasury yields over three decades, has just launched the most significant warning of an economic downturn in 2007.
• 10-year bond yields fell to 1.71, while three-month yields fell to 2.01, the most significant investment in the yield curve since the financial slowdown that began ten years ago.
• Investments in the yield curve are considered a good indicator of the recession, as it means investors are convinced that with long-term interest rates lower than in the near term, economic growth will slow and that the Federal Reserve will be forced to lower its federal funds.
• At the last meeting in July, the Central Bank of the United States has reduced financing costs by 25 points, which is the first time since the 2008 recession.
• The ongoing relations between the United States and China, with the Treasury Department designating Beijing as a money manager, is another big red flag. The fact that China has reduced its currency has caused a sharp slowdown in the US stock market.