US – With the likely upcoming technical recession at the end of this year’s second quarter, you may be wondering how to best prepare for the adverse effects of this scenario on your personal life and financial well-being. Thus, below are the three practical steps you can make to lessen the negative impact and even capitalize on this economic downturn:

Reduce/Mitigate Your Personal and Business Debt

With the rising interest rates brought by US Federal Reserve to curb the massive inflation in the US, most forms of debt will naturally become more expensive to take. In implementing a tightening monetary policy, the US Federal Reserve aims to reduce the overall spending and borrowing, which significantly contribute to the rising inflation rate.

Currently, mortgage rates are already nearing 6 percent; both personal and business loans will soon follow this trend. So, it will be prudent to pay off your existing loans immediately. Additionally, if a recession indeed occurs, consumer demand for goods and services will plunge. This has happened in every economic downturn in history. Thus, it could be detrimental and unwise if you wish to take a personal or business loan to cover an expense or start a venture during the upcoming economic downturn.

Build Your Emergency Fund

An emergency fund is your savings buffer set aside exclusively for emergencies such as job loss and sudden medical and hospitalization expenses. It is best to set a target to save at least three to six months of living expenses set aside for this purpose. If a recession indeed occurs, mass lay-offs could be expected. Thus, it will be prudent to have set aside at least three months’ worth of living expenses to weather this and allow your smooth transition towards a more flexible career.

Moreover, if a job loss is not a concern, there are still a lot of unforeseen events that could still come up that you need to be solvent to address. These emergencies include sudden medical expenses, the demise of a family member, and acts of nature that are beyond our control.

The recent data in April of this year reveals that the average American’s personal savings rate is only 4.4% percent of their income. This means that, on average, less than 5% of disposable income is allotted by Americans for savings. Therefore, it could hinder your financial position and put you in an unpleasant predicament if your savings do not cover a possible emergency that could come up during a recession.

Seek a Financial Advisor/Expert

All individuals are different on a micro-level and thus have unique personal financial situations. To best approach your unique financial situation, it will be crucial to receive expert guidance on the more complex aspects of your finances, such as your investments and retirement portfolios.

Financial Advisers could keep you on track despite the economic downturn and give you peace of mind that you could weather the challenging economic environment and take full advantage of the situation.

Final Thoughts

At the end of the day, as individuals, we cannot dictate where the economy is heading; thus, we can only manage the things within our control. Preparing for the worst, in this case, a full-fledged recession is the best thing we could do and perhaps the only thing we can do.