All across the country, Americans with financial concerns are worried about three big challenges: inflation, higher interest rates and the economic fallout from a recession.
Although it’s easy to get caught up in news headlines like “The Federal Reserve Plans To Raise Rates Again,” it’s not a good for anyone’s wallet – or mental health – to allow things that are outside of your control to cause you financial anxiety.
It’s far smarter to focus on the stuff that YOU can control. After all, we have ZERO control over inflation, the Fed’s actions, or whether or not a recession officially materializes.
A better approach is to concentrate instead on your OWN personal financial choices and behaviors, especially when it comes to earning money — and then saving it, spending it, investing it, and donating it wisely.
With this in mind, here are 15 ways anyone can fight inflation, higher interest rates, and the prospect of an economic recession.
To fight inflation/higher prices, try these steps:
1. Negotiate your salary
With the U.S. unemployment rate currently at 3.5%, a 50-year-low, it’s still very much a worker’s market in America. That’s why the “Great Resignation” is still ongoing nationwide. People are taking advantage of the tight labor market to quit their jobs in pursuit or better opportunities, or sometimes to start their own businesses.
But if you actually like your job, and just need more money, don’t hesitate to ask for a raise.
A pay raise – whether it’s a merit-based increase or a nice cost of living adjustment – could be just what you need to better handle higher prices. And in the present economic climate, right now you have leverage with your employer. Negotiate!
2. Cancel those subscriptions
We’ve become a subscription economy. People have subscriptions for everything: from wine and gift boxes to newspapers and entertainment services. But here’s the thing: according to a recent study from market research firm C+R Research, most people are spending $219 a month on various subscriptions – even though they mistakenly think they’re shelling out just $89 a month on subscriptions.
So do yourself a favor and check your credit card bills or debit card statements and see what subscriptions you’re paying for that you can eliminate. Chances are you probably have subscriptions you’re still paying for each month that you’ve forgotten. Don’t have time to do all that? Then use a service like Truebill or Trim, which will track your recurring charges and cancel your unwanted subscriptions for a small fee.
3. Avoid pain at the pump
After the average price of gas nationwide peaked at $5.01 a gallon in June 2022, gas prices have been steadily dropping and are now around $4.05 a gallon, according to AAA. Nonetheless, it still stings for a lot of folks to fill up at the pump because prices remain higher than they were a year ago.
To combat elevated gas prices, consider whether you can avoid the pump altogether. For instance: can you walk, bike, carpool, or take public transit instead? Maybe it’s not always possible. But there likely are some circumstances in which you could lessen your reliance on a car, thereby decreasing your need to buy higher-priced fuel.
4. Dump that second car
Speaking of cars, does your household really need that second vehicle you own?
Getting rid a second vehicle is a fantastic way to counter the effects of inflation because car ownership entails a lot of spending and higher prices to keep and maintain that set of wheels.
Specifically, if you give up a second vehicle, you can save many thousands of dollars annually by NOT having to pay car payments, gas, maintenance and car insurance for that vehicle.
By the way, I do practice what I preach. I shared this post on LinkedIn about dumping our second car.
5. Go generic
When you’re at the grocery store or at a retailer, shopping online or in person, don’t worry about buying brand labels. Whether it’s food, clothing or even medicine, you can save anywhere from 25% to 70% just by choosing the generic item.
To combat higher prices, take the store brand cereal or milk, skip the designer clothes, and get that generic prescription medicine. You won’t be sacrificing much, and you don’t have to worry about harming your health either since, by law, generic medications must have the same active ingredients as brand name pills/medicine.
To fight higher interest rates, try these steps:
6. Pay down credit cards and consumer debt
Since the Fed has already put us all on notice that it plans to continue raising interest rates, anyone with credit card balances is going to see those minimum payments rise.
Most credit cards have variable rates, so credit card issuers can and will change the rates accordingly.
Currently, the average credit card interest rate is hovering around 17.5% and is expected to climb to a record high of 19% by the end of 2022. By paying down credit card bills to the best of your ability, you’ll sidestep higher borrowing costs in the form of finance charges. Ditto for any loan with a variable rate, including mortgages and student loans.
7. Request a lower rate
Now is also the time to call up your credit card company and ask for a lower credit card interest rate. If you’ve been a good-paying customer, they likely will say “Yes” to your request. Various studies show that about 75% to 80% of consumers who call to request a lower rate actually do get a better rate.
8. Do a balance transfer
If you have a really high credit card interest rate and a creditor won’t budge and lower the rate, then do a credit card balance transfer. That’s where you swap the debt on your high-rate credit card for a 0% credit card deal for 12 to 18 months to save on interest/finance charges. You’ll have to pay a fee, typically anywhere from 2% to 5% of the amount transferred. But it’s usually worth it to get that 0% rate for a year or more. You can pay off your principal debt balance a lot faster when you don’t have to pay sky-high interest rates.
9. Talk to your creditors
If you ever find yourself in a financial bind and simply can’t afford to pay ANY obligation — a mortgage, student loan, auto loan, etc. – don’t stick your head in the sand. Call your lender or creditor and discuss your options.
This is especially crucial for homeowners with ARMs, or adjustable-rate mortgages, who are seeing their monthly payments rise as interest rates trend upward. Unfortunately, some of these homeowners facing higher borrowing costs start to panic and instead of exploring their options, they ignore the bills and do nothing, hoping for some miraculous, 11th hour solution.
In fact, a shockingly high percentage of people who lose their homes in foreclosure never even speak at all to their lenders. Likewise, nearly 1 in 5 Americans are afraid to even look at their credit card statements, according to a recent report from the travel website, Upgraded Points.
Don’t let fear and worry prevent you from reaching out for help in tackling higher interest rates.
10. Get outside debt help
If you simply can’t bring yourself to personally face your creditors and try to get better interest rates or loan terms, it’s time to call in a third-party advocate.
Enlist the support of a debt help agency, preferably a non-profit credit counseling agency. They negotiate on your behalf. In fact, they’ve typically worked out deals in advance with banks and credit card issuers to get you lower rates (or even 0% deals) when you sign up for a debt management plan.
To fight a recession/economic slowdown, try these steps:
11. Use OPM (Other People’s Money)
In this case, think about the ways in which other parties, especially your employer, can provide financial relief in the event of a recession.
Laid off from the job? Take advantage of the resume prep service or career counseling options they may offer.
Still working there? Take advantage of every perk and benefit your job offers, like free money for parking or commuting, money to earn a degree, and funds toward childcare or eldercare. Whatever your organization provides — from free food to financial coaching — say Yes! It’s less money out of your paycheck, which is one way to better survive a recession.
12. Use windfalls wisely
Save “extra” money you get, like tax refunds, job bonuses, commissions, inheritance checks or divorce settlement money, etc. These are all windfalls that can let you weather a recession – provided you don’t blow the money!
13. Build two emergency funds
No one ever complained about having too much cash, or extra money on hand to deal with emergencies and unexpected events, including possible job loss, divorce, or illness. Just having a few hundred bucks to get you through one-time blips, like a car repair, can be helpful.
So, create two emergency funds. The first one is a short-term emergency savings account that’s anywhere from $500 to $1,500. This rainy-day fund holds money that is to be used for any short-term crisis (like a flat tire) where you can just throw money at the problem and make it quickly go away. Think of your short-term rainy day fund as an umbrella you pull out when it rains. The “rain” is any situation that can dampen your budget. But just like rain is mostly a temporary weather condition, your financial problem is similarly here today but probably gone tomorrow, and your umbrella (your rainy day fund) covers you.
The second emergency fund is a long-term savings nest egg. This is a larger financial goal, where you build up your savings to at least 3 to 6 months’ worth of your overall monthly expenses. So, if your bills are $3,000 a month, then your rainy-day fund should be $9,000 to $18,000. This money is to be used to cover you for a long duration when income stops unexpectedly, due to job loss, divorce, illness or disability. Think of your long-term emergency fund as something that helps you withstand a drought or rough conditions that will last a while. Just like if you were lost on a long hike or wading through a desert, and you’d want to have food and water to tide you over, you’d also want a hefty emergency fund to help you survive an arduous personal or financial situation.
Let’s address the elephant in the room: who can afford to sock away 3 to 6 months of bills?!
Listen, I know it’s hard to amass that level of savings. But don’t stress out about the numbers. The key is to just get started.
Save little by little and be disciplined and consistent in your savings efforts. That’s what is most important – because you’ll be building your savings muscles and skills, which will serve you well over the long haul, in a recession or in a booming economy.
14. Plan for a pink slip
Recessions have a way of upending the status quo in the blink of an eye.
Consequently, even if you think you have a secure job, it’s always best to act as if your employer might tell you at a moment’s notice: “Sorry, we don’t need you anymore” or “We’re eliminating your entire department.”
Even highly valued, sought-after workers and talented employees should plan for a pink slip, even if you don’t think you’ll need one.
Planning for a pink slip means that you keep your resume up to date, you network and stay in touch with key contacts who might be helpful in a job search, and that you always keep your job skills in tip-top shape too. That includes the technical or functional skills required to perform your role, as well as other traits, like your managerial and communications skills too.
15. Create a Financial Plan B
Among the many financial lessons of the COVID-19 pandemic is that more people need to better plan for the unexpected. Obviously, a global health crisis was not on most people’s radar, nor was the recession that immediately followed.
But at this point in time, when many individuals are worried about the threat of a recession and its impact in various ways, it’s time to take a step back and ask: “How can I best prepare myself if we do have an even more severe financial downturn, or if there is a recession?”
One of the best things you can do right now – which will help you in good times and bad – is to run through a whole bunch of “what if” scenarios and evaluate your risk level in each scenario.
- married people could get divorced or suffer the death of a spouse
- a single person could lose their job.
- someone might be called on to help out family members in need, and so on
Just thinking through a variety of circumstances is a start. After that, you need to start creating a Financial Plan B for how you would economically deal with those events.
If a close relative needed money to save their home, would you provide a loan, offer to let them live with you free, or charge them rent that’s cheaper than their current mortgage?
If you lost your job, had an accident, or experienced a serious illness and couldn’t work, how would you get by? What would you do to pay for food, housing, or utilities?
The point is: think ahead to structure good solutions ahead of time, before a full-blown recession or some other calamity strikes.
That way you’re not under extra stress and making bad decisions under the gun when a crisis hits. You also usually have more options and solutions when you plan in advance as opposed to waiting until disaster strikes. That’s why things like insurance (property/casualty, life, and even health insurance) come in handy to help protect you against a variety of risks.
Getting through tough economic times or periods of financial uncertainty isn’t always easy.
But with some planning and the right action steps, you can use a lot of creative ways to fight inflation, higher interest rates and even the impact of a recession.