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What you need to know about a potential recession in the U.S. – News

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Some economists believe a recession is imminent. With a war in Europe, inflation, a crumbling supply chain and continuing threats to public health converging, the economy is struggling. Missouri State University finance and risk management department head, Dr. Jeff Jones, agrees. 

But this potential recession may indicate a return to normalcy after a period of economic extremes. 

What does a recession mean for our economy? 

Many may experience some degree of financial hardship, but minor recessions are not always a bad thing, according to Jones. 

“It’s more of a leveling out that has been long overdue, he said. 

“A mild recession can help cool off the high inflation rates we’ve been seeing and help us to look at our spending habits.” 

Even with the likelihood of a recession, it is unlikely that we will experience an event comparable to the 2008 recession or the ‘stagflation’ of the 1970s. 

Stagflation occurs in periods of high inflation and high unemployment.  

“Even if the job market tightens back up, it’s unlikely that we will see a return to stagflation,” explained Jones. 

“We also aren’t seeing the high level of debt exposure that catapulted us into the 2008 recession, he added. 

Ultimately, we can expect to see a return to a more stable economy and job market. 

Your financial wellbeing 

Now more than ever, it will be important to assess your financial health and plan accordingly. 

Jones’ advice can be broken down into three steps: 

Step 1: Assess your financial health 

Fully analyze your finances. Determine how you’re doing, what your financial goals are and how to get there. 

“There is no one-size-fits-all approach to financial planning,” Jones said. “Consider your stage of life, debt to income ratio and anything else that may impact your spending.” 

Does your financial situation feel insurmountable? Seek professional advice for direction. 

“A professional can get you organized, identify strengths and weaknesses you may not recognize on your own, and create a plan that will work for you,” Jones said. 

Step 2: Live below your means 

Don’t fall victim to lifestyle inflation. You might want the latest gadget, trendy bag or luxury vehicle, but you don’t need it. 

Attend to your needs first and save up to pay for your wants in cash. 

Step 3: Prioritize saving 

Approximately 56% of Americans do not have enough savings to cover a $1,000 emergency expense. 

Jones’ advice? “Pay yourself first.” 

“Put money into your savings and ensure you will have what you need, should an emergency arise,” Jones said.  

Advice for investors 

If you own your home, have a retirement plan or even a savings account, you are an investor.  

“We are entering a bear market so you will not see the high returns we had over the last couple of years,” Jones said. 

When stocks start to fall many investors will panic. How can you avoid this? Don’t monitor your investments too closely, advises Jones. 

“Be patient during this time and maintain a diverse portfolio.” 

Explore finance and risk management at MSU

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