Financial experts spent much of 2022 warning the public about an impending recession. And those warnings persisted earlier this year as well.
But lately, economists have backed down from all of that doom and gloom. Instead, they’ve acknowledged that a 2023 recession isn’t looking very likely after all.
That, however, doesn’t change the need to build savings, says financial advisor Suze Orman. In fact, Orman says that fixating on recession warnings isn’t a great use of people’s time. Instead, they should focus on their own personal finances and take steps to improve them, regardless of what the economy is doing.
The broad economy isn’t necessarily your concern
The idea of a recession can be scary because economic downturns have the potential to lead to an uptick in job loss. But even when the economy is strong, it doesn’t necessarily mean that you, as an individual, are in a good place financially.
Similarly, the economy might end up in the toilet for a period. But if you have solid cash reserves, you may not need to worry so much.
That’s why Orman says you’re better off focusing on your personal situation rather than keeping tabs on recession warnings. When you don’t have an emergency savings account and your car breaks down and you need $300 to fix it and you don’t have it…who cares if there’s no recession?” she asks.
Orman also feels that even though recession warnings have waned recently, that doesn’t mean Americans on a whole are in a good place. “People still can’t afford to buy homes, they can’t afford to rent, and credit card balances are increasing dramatically,” she explains. “It does not matter if the economy is in a recession or not.”
She makes a really important point. U.S. credit card balances recently surpassed the $1 trillion mark. And housing affordability is at its worst level in almost 40 years. That hardly paints a picture of a great economy — even though a near-term recession may be off the table.
It’s best to focus on you
You may be relieved to hear that a near-term recession isn’t likely to happen. But that doesn’t mean you shouldn’t try to take steps to improve your own finances if you feel they need work.
Recent data from SecureSave found that financial stress among employees has skyrocketed. And 63% of workers today are unable to cover a $500 emergency expense.
If that’s a boat you’re in, try setting up an automatic transfer that allows some amount of money to leave your checking account each month and land in savings. If you can only afford to part with $50 a month, so be it. And if it’s less, that’s okay, too. But it’s important to build up some sort of personal emergency fund so you don’t immediately have to resort to credit card debt when unplanned expenses arise.
Hearing that a near-term recession is now less likely may be giving you comfort. But, as Orman says, “You can have a thriving economy and you can still be on the highway to poverty.” So rather than focus on the big picture, focus on yourself, and take steps to build yourself a financial safety net.
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