For most of 2022, people were warned by financial experts to get ready for a possible slump in 2023. Their thinking was that if the Federal Reserve raised interest rates, people might spend less, which could cause the economy to go into a recession.
Even though the economy has been strong so far, the Federal Reserve knows that rate hikes and the recent problem in the banking industry could cause a mild recession later in 2023. So, it’s a good idea to be ready for this to happen.
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How to Get Ready for a Slump? Light Recession
There are different kinds of economic downturns. A light one might not hurt as much or last as long. But it’s still important to be ready for a slowdown, and a strong emergency fund is a good way to do that. You should try to have enough money in your savings account to pay for your basic needs for at least three months.
So, if you lost your job, you’d have enough cash on hand to get by while you’re looking for a new one, and you wouldn’t have to rack up credit card debt to make ends meet. In addition to building up your savings, you should also try to pay down any high-interest debt you may still have, like a credit card amount.
During a slump, if you lose your job, the last thing you want is to have to deal with extra bills. Last, but not least, it’s a good idea to have a backup source of income in case you lose your job.
Luckily, the gig economy is still going strong, and you may have a lot of choices to choose from. A side job can help you save more money and pay off any bills you have, and it’s something you can grow if you need to.
Will Another Round of Stimulus Checks Be Needed if the Decline is Only Mild?
As part of the American Rescue Plan, lawmakers passed the last round of stimulus checks in March 2021. This was because of the high unemployment rate and health concerns about going back to work. If there were a mild slowdown in 2023, it’s unlikely that the federal government would agree to help.
This is partly because the situation might not be bad enough to need such help, and partly because lawmakers were criticized for being too generous with stimulus funds during the pandemic, which some financial experts think led to rising inflation. So, it’s probably safe to think that this time around, lawmakers will be careful with stimulus funds.
But if the economy gets worse in a big way, a second round of stimulus might be more possible, but people shouldn’t hope for this to happen.
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