Getting in Recession-Ready Mode, Whether It’s Coming or Not

When I think back to the Great Recession of 2007 to 2009, one moment in particular stands out. I had applied for a position in early 2008 that I was really excited about, as the editor of a special section on home and interior design in a local weekly newspaper. I sat down to read the long-awaited email from the paper’s editor announcing his decision, and in it he explained that the special section’s occurrence and page count was being scaled back, and the position I applied for had been reduced to a freelance gig that paid much less than what I had been told (in other words, it would have barely covered the cost of groceries). He added, “This is purely a result of the economy.”

It was the latest in a string of job-related letdowns that began about a year earlier when I moved to a new city a few years after graduating college. I pursued writing/editing roles I really wanted, only to be told something to the effect of, “We really want you! But we can’t afford to pay you a salary. Trust us, if we could, you’d be working here!” Thanks, but unfortunately a compliment can’t cover the cost of living expenses. In order to achieve some sort of financial stability, I had to pivot my career goals (to my disappointment, that meant writing things like press releases for software companies for a while, not stories about interior design or another lifestyle-related topic I enjoyed).

Obviously, those who lost their homes, retirement savings and high-level jobs that supported a family had a much more dire experience during the Great Recession than I did, but my story is an example of how a recession can prevent us from reaching our full potential and force us to take our lives in another direction.

While there are no clear answers as to when the next one will hit, fears about a 2020 recession have been swirling around for a while now. A Gallup report from September 2019 found that 49% of U.S. consumers thought a recession was at least fairly likely in the next year. Last month, Forbes reported that 97% of American CFOs said an economic downturn has already begun or will begin in 2020, up from 88% who said so in 2019, according to a Deloitte CFO Signal Survey (Forbes noted that CFO sentiment, which provides insight into consumer and business spending, was relatively accurate in predicting the 2008 downturn).

Panic over the coronavirus is also fueling recession fears. On Jan. 30, CNBC reported “Mad Money” host Jim Cramer believes it’s too early to tell whether the virus will trigger a recession, but said if it leads to a death in the U.S., the stock market will likely fall.

The mixed signals being sent by economists via the media are likely worsening fears of a recession; when no one can assure us that things will be OK, our brains can go to all sorts of dark places. Moola Chief Investment Officer Simon Moore explained the economic factors in play in a Jan. 2 post for Forbes, helping people like me, who are more interested in topics like interior design than the economy, understand where we’re at. Two negative events from 2019 could point to a recession soon: An inverted yield curve, which happens when longer-term government bond interest rates fall below short-term ones, and a slowing in manufacturing. “If that (slowing) trend continues, the remainder of the U.S. economy may struggle to offset the drag from a sluggish manufacturing sector,” Moore wrote. On the other hand, four positive developments could spare us from a recession, he said: Stocks have performed well, inflation has been mild, policies have been put in place to support the economy and unemployment is low. He concluded that the direction the economy will take largely depends on whether manufacturing declines further, and if unemployment rises (4% could easily mean a recession; we’re currently at 3.5%).

If that information failed to ease your worries, I wouldn’t be surprised. So what are the worst things that could happen to you – as a consumer, employee and possibly homeowner – during a recession, and how can you prepare? Most Americans, according to a Nerdwallet survey, are most concerned about their cost of living going up (63%) in a hypothetical 2020 recession; other concerns include having to tap into emergency savings to pay for necessities, not being able to pay bills on time, the value of their investments going down, going into or increasing their credit card debt to pay for necessities, losing their job, having to sell investments to pay for necessities and losing their home.

Preparing for these scenarios, which is a good idea whether a 2020 recession happens or not, really comes down to living below your means and eliminating all unnecessary expenses. If you have a steady income now, your first priority should be paying down debt, not keeping up with the Joneses who are always showing off their perfect car, house and kids on social media. Looking successful to your peers might seem like a priority until you realize that first, the Joneses aren’t going to bail you out in a financial emergency, and second, your peers care more about how they look.

Then, see what you can cut from your monthly spending. Your biggest expense is likely housing – could you downsize, rent out a room on your property, or even embrace the idea of multi-generational housing? When’s the last time you took inventory of your streaming service and premium app subscriptions? If you’re particularly worried about losing your job, you can update your resume and LinkedIn profile, make a list of professional contacts to reach out to should your job be in jeopardy, and take on a side hustle to secure an additional stream of income that would soften the blow if your primary job went away.

It is wise to take precautions even when things seem to be fitting perfectly in place. That goes for financial health, emotional health, and – as the number of coronavirus infections climbs toward 25,000 worldwide and flu-related deaths in the U.S. reach 10,000 this season – physical health. If you’re one of those wackos who wears a mask to the airport, I applaud you.

Natasha Chilingerian is executive editor for CU Times. She can be reached at nchilingerian@cutimes.com.