Tariffs, Recessions, Inflation, Oh My!

I’ve been trying to stay up to speed on the state of the American economy and let me just tell you: Yikes! It sure looks like there’s a storm coming and it would be a good idea to make sure your “cellar” is ready before it hits and to hang on to your little dogs so you don’t get distracted and blown away! Let me explain…

While no one knows exactly how things are going to pan out in the economy, there are a couple of high likelihoods. Moody’s (a financial data/analysis firm aimed at informing businesses and financial leaders) rates the likelihood of a national economic recession in the next 12 months at 49%. At the same time, we’re just starting to feel the impact of tariffs in rising prices across a variety of goods and there’s a good chance things are just starting to heat up in the inflation department. The Fed is likely to cut interest rates in September…but will that make mortgage rates go up or down? It depends on what investors think it means and how they act in response.

What’s going to happen?!?

I don’t know. But neither does anyone else with certainty.

The good news is, you don’t have to know what’s going to happen to be ready for it. It’s like seeing a Tornado Watch pop up on your weather alerts. You know something’s brewing, but how bad will it be? Will it hit you or miss you? When might it come? In my house, a Tornado Watch is the time when we move snacks, blankets, toys, a power bank and phones into our storm shelter, but we keep jugs of water and a bucket of other emergency supplies down there at all times. We don’t know what will happen, so we just try to be prepared so we’re not scrambling in the middle of a bad storm to have what we need. Similarly, having a solid financial plan includes being ready for whatever the economy throws at you. During a significant downturn, you need to be ready for multiple things to happen at once: lay-offs, drops in asset values, higher prices, tighter lending requirements, etc. etc. But believe it or not, economic downturns tend to also be great times to invest (everything’s cheap!), if you can weather the storm well enough to do so.

You might be thinking, “Well, shoot. It’s a little late for me. I don’t have the time or resources to build a financial fortress soon and I wouldn’t even know where to start.” To that I say, it’s never too late to do what you can to get ready.

If you don’t have at least 10-15% margin in your budget (that means extra room in your budget for prices to rise or for income to be cut), start there. If you don’t have that, this is the time to start a side-hustle, move out of town for a less expensive home, grab a roommate, or apply for a higher-paying job, preferably in an industry unlikely to make large cuts during a downturn, like healthcare, auto repair, utilities, etc. Or do all of them!

Next, save everything you can. Put your cash in multiple institutions in case there’s a bank run and you can’t access your cash right away from one institution. Use a high yield savings account to give you at least a little protection against potential inflation.

And if the worst doesn’t happen, these steps still move you to a stronger financial platform to launch from and get to where you want to go.

Whether you’re looking for help to build a strong foundation or are ready to look ahead to goals and dreams down the road, I’m here to help. Reach out for a free consultation!

My children love severe weather because to them it represents opportunity for a rare adventure in our little storm shelter. I prefer not to be cramped in the stairwell glued to the radar, but if there’s going to be a storm, you might as well make the most of it. My hope for you is that you can look to economic storms in the same way—adventures in which you get to use all you’ve prepared and to take advantage of the financial opportunities that only come with severe economic weather!