While the unemployment rate is currently low and the country’s GDP is high, many experts are predicting that a recession is right around the corner. According to Bloomberg, the risk of a recession within the next 12 months is 26 percent. While it may not be time to panic yet, we should be watching the economy closely, and be very aware of how a recession may affect us.
How a Recession May Affect You
Those who are predicted to be affected the most by a recession are millennials, those born between 1981 and 1996. Indeed, an article published in The Atlantic claims that “the next recession will destroy millennials,” especially when considering that millennials are already in debt and without savings. There are four primary ways in which a recession is predicted to affect millennials:
- Higher unemployment rates, making it harder to find or retain a job during the recession.
- While the forecasted recession isn’t predicted to hit the housing market as hard as the last one did, those without savings may have trouble buying, and those who already own may have trouble paying down a mortgage, especially if a job is lost.
- Paying off debt will become more difficult for everyone during a recession – millennials have hundreds of billions of dollars in debt, most of it is student loan debt. For millennials, then, escaping debt during a recession could prove nearly impossible.
- Finally, it’s very likely that investments will lose value during a recession. This can be scary, but remember that leaving your money where it is and waiting it out is almost always the best course of action.
Steps to Take to Protect Yourself Financially During a Recession
If you’re a millennial and there is a recession in the future, you may be at a greater risk of being affected than are those in other generations. But that doesn’t mean that there’s nothing that you can do to safeguard yourself against risks. To be sure, here are some things that you can start doing now in an attempt to recession-proof yourself:
- Pay off your debts now. It may be easier said than done, but the last thing that you want to be worrying about in the event of a recession is a large amount of debt. By paying down your debts now, you’ll have more financial peace of mind in the future.
- Save as much as possible now. You should be putting away at least 10 percent of your income in savings each month, if not 20 percent. By having a robust emergency fund in place, you’ll have some protection in the event that a recession does hit.
- Consider your income. Remember, if a recession hits, losing your job is a possibility. As such, you may want to start thinking about ways to make yourself invaluable to your company or to diversify your income stream.
Reach Out to an Indiana-based Financial Professional to Learn More
Recession or not, having a smart financial plan in place is a wise idea. At Harvest Financial Planning, LLC, we can assist with saving, investments, and more. Reach out to our financial advisors today to learn more.
(The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.)