The current financial climate is causing considerable concern across the United States, with economic instability leading to volatility in financial markets and consumer confidence plummeting to its lowest in five years. Many experts caution that the risk of a recession is on the rise. According to a recent survey, about half of American adults believe that President Trump’s trade policies may significantly drive up prices. Moreover, approximately half of Americans are either “extremely” or “very” worried about the prospect of the U.S. slipping into a recession in the near future.
Matt Watson, the CEO of a financial planning app called Origin, highlights the prevailing uncertainty. He states, “No one can predict with absolute certainty what lies ahead, including seasoned professionals in this field.”
For those anxious about how economic uncertainties might affect their lives, experts offer several strategies:
First, it’s crucial to assess your financial situation. Understanding your current expenses and overall financial health is the initial step in preparing for uncertain economic times. Matt Watson emphasizes the importance of knowing your spending habits, stating, “Take stock of where you are in different aspects of your finances.” Analyzing your savings and investments can also provide insight into your economic position.
Next, identify areas where you can reduce expenses. By cutting back on nonessential spending, you can save more funds for emergencies. Watson advises, “It’s more sensible to trim your expenses now and create a financial cushion.” Jim Weil, managing partner at Private Vista, suggests categorizing expenses into “needs,” “wants,” and “wishes.” Temporarily postponing “wishes” like an overseas vacation can help enhance your financial standing.
Additionally, protecting your mental wellbeing is vital. With distressing news coverage about tariffs and potential job losses, one can become anxious. Courtney Alev, a consumer advocate at Credit Karma, advises ensuring a balance between staying informed and maintaining mental health. She says, “It’s important to be informed, but the news shouldn’t overwhelm you.” For persistent anxiety, seeking assistance from financial therapists or mental health professionals is recommended. Various health insurance plans cover some mental health services, and there are resources for sliding-scale therapists.
Focusing on elements you can control is another key strategy. Rather than fixating on national economic issues, Alev recommends examining areas of your personal financial life that are within your control. Budgeting, cultivating an emergency fund, and minimizing unnecessary costs are steps one can undertake.
Creating an emergency fund is essential, even when resources are tight. A fund that can cover three to six months of expenses is ideal, and starting with a smaller goal can still be beneficial, according to Alev. Jim Weil advises considering future financial commitments, such as education expenses or relocating, to determine the size of your emergency fund.
Regular finance check-ins can also help stay on course. Alev suggests adjusting your budget monthly to track financial objectives, monitor overspending, and accommodate evolving needs. “Budgets work best when they help with decision-making,” Alev remarks. So don’t shy away from modifying your budget as needed.
Determining which debts to address first is critical in effective financial planning. With many people managing credit card or student debt, prioritizing is essential. Weil recommends categorizing debts into short-, medium-, and long-term and focusing on high-interest debts like credit card balances. Eliminating or reducing credit use can help if serious progress on paying down debt proves challenging.
Lastly, remain calm regarding investments. Despite tumultuous days in the stock market, hasty reactions aren’t advisable. For those holding investments, particularly retirement accounts, Alev cautions, “Try to avoid panic. Things may appear unsettling, but time is on your side.” Those approaching retirement should consider more conservative investment options.
In uncertain economic times, these expert tips can guide individuals in safeguarding their financial and mental well-being, paving the way to navigate potential challenges ahead.