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Here are 5 ways you can prepare for a possible recession

While the big money on Wall Street is preparing for a mild recession, Memphis experts agree, we all should be doing the same.

MEMPHIS, Tenn. — Americans are feeling the challenges of inflation as many work to navigate skyrocketing prices at the pump and the grocery store. The financial stretch is even sending many families to food banks to make ends meet.

According to a new report from ABC News, Wall Street is betting on a recession sometime within the next 12 to 18 months.

While Wall Street is preparing for a mild recession, 901 Economics President Dr. John Gnuschke says we all should be doing the same.

"Most people are afraid of inflation. They ought to be afraid of a recession,” said Gnuschke. “The recession is going to impact people more than the price of gas. If you're unemployed, you can't buy gas."

This hasn't happened in years. Our country's last recession started in 2007 and lasted until 2009, also known as ‘The Great Recession.’ According to the Federal Reserve, millions lost their homes and their jobs in the longest economic downturn since World War II.

“Times are different than they were in prior recessions,” said Dr. Gnuschke. “This is a very unique time period. It could end quickly, or it could continue for several years."

It is almost impossible to predict how much money you could lose, or exactly what will happen, but here's what we do know, historically: When there's a recession, more people could be out of work and fewer jobs would be available. Interest rates go up, and the economy slows down.

“When things are potentially going to get worse, or could get worse, it really makes sense to clean up what you can," said Stacey Hyde, CEO of Envision Financial Planning. 

First, even if you're losing money in your 401k or other retirement fund, keep contributing.

"If you sell out, and you're down 10%, 15%, 20% or more, it's going to take you 10 years to get back to where you are,” said Hyde. “Keep contributing. When the market recovers, and I have full faith that it will, you'll wind up with more money because you bought more shares."

If you have a credit card, it might be a good idea to raise your line of credit.

"That can also help you with what's known as credit utilization,” said Hyde. “Because if you have a higher credit line, but don't use it, then your credit utilization will be lower, and that'll help your credit score."

Hyde recommends you pay down as much credit card debt as you can. Also, continue to save and build your emergency fund. Don't focus so much on short-term losses.

“You have to decide what you want to focus on,” said Hyde. “Are you going to focus on the days or the decades?"

Economist John Gnuschke said the recent price increases are as troubling as they were in the late 1970s.

Posted by ABC24 Memphis on Friday, June 3, 2022

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