Six things you can do to recession-proof your finances

The Conference Board predicts with 96% certainty that the US economy will enter a recession in 2023.

That scenario leaves Americans worried about their own financial prospects next year. A recent survey found that more than two-thirds (69%) of American adults are concerned about an impending recession, with 41% saying they are “unprepared” for tough economic times.

The good news? Financial experts say you can take steps to mitigate the impact of a nasty recession. But you will have to work for it.

“Let’s face it, many of us are stuck in a routine, living from day to day and paycheck to paycheck without any plan,” says professional stock trader Thomas Kralow. “After all, Steve Jobs never said, ‘Well, let’s just go ahead and see where this takes us’ when Apple invented the iPhone.”

“To achieve something great, you have to have a plan and stick to it,” Kralow added.

Six financial steps you need to take now ahead of a recession

To go big and beat the recession in ’23, financial experts advise taking these measures – and the sooner, the better.

Create a recession response plan. Build a defensive financial plan — but not just any plan, Kralow said. “Just listing all your desires isn’t worth it,” he noted. “Each plan must include the following”:

· Your current position

· Your long-term goals

· Realistic short-term milestones

· An assessment of your current skills and resources, and what you need to add to achieve your goals

“Once you have your plan, make sure you do regular checkups to make sure you’re going in the right direction,” Kralow added.

Stop buying things you can’t afford. More than 3 in 5 (61%) Americans own a credit card and the average balance in 2022 will be $6,194. Add to that the deferred payments by using “Buy Now-Pay Later” schemes, which push consumers further into debt, and that debt becomes a problem.

“Stop trying to impress, stop comparing yourself to others, and stop buying things you can’t afford,” Kralow advised. “Except for the bank executives who profit from your debt, no one really cares about your frivolous purchases.”

Minimize food costs According to the US Bureau of Labor Statistics, food prices rose 7.7% in October 2022 due to inflation.

“In an effort to save, buy what you need to avoid perishable waste, but also buy on sale,” said Kate Cheesman, DailyPay’s Vice President of Customer Success.

“Sign up for your supermarket’s rewards program and browse their weekly catalog for coupons and offers.”

Buy in bulk when you can. “That’s a great way to lower the cost of necessary goods,” Cheesman noted.

Diversify your income streams. Many companies are cutting headcount and this trend is likely to continue through the recession. To protect yourself from an unpleasant situation, research ways to supplement your income.

“You don’t need two full-time jobs,” Kralow said. “Instead, consider starting a pet project, taking on some freelance work, investing, consulting, or sharing your knowledge online. This is where adding new skills and knowledge to your toolbox really comes into the spotlight.”

Focus your portfolio on reliable consumer stocks. The good news for investors is that a few subsequent and moderate rate hikes are largely expected and priced into the markets.

“The biggest concern for equities in 2023 is undoubtedly the Fed-induced slowdown, which is likely to lead to earnings downgrades and/or missed earnings,” said Reid Hartman, Global Predictions’ economics chief.

The safest stocks to head into the new year are in sectors such as consumer staples, utilities and health care, Hartman said.

“There will likely be opportunities to switch to recovery-oriented stocks (e.g. categories such as consumer discretionary, industrials and real estate) at reasonable prices later in the year after earnings expectations have come down and prices have fully dampened,” he said. “Investors should also feel more comfortable holding bonds now that interest rates are spiked.”

Go the fractional route. Households seeking recession-resistant investments should consider taking part-ownership in historically high-earning “real” assets/alternative investments such as real estate, high-end art, farmland, and franchises.

“Fraction shares have long been popular with the 1%, but have only recently become available to retail investors,” said Kenny Rose, CEO of Fransshares. “There’s a reason you see so many celebrities like Patrick Mahomes and Shaq investing in these asset classes.”