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Talk about tragic news.

Key Point

• Economists have been warning of an impending recession for months.
• One major financial insider believes things could be worse than many expected.

In recent months, economists have been warning of a coming recession. The Federal Reserve has been very aggressive in raising rates this year to slow the pace of inflation. The Federal Reserve’s goal is to raise borrowing high enough for consumer spending to start declining, thereby closing the gap between supply and demand that has caused the cost of goods to skyrocket. It’s helpful.

But the Fed is taking risks. If interest rates are raised too high, private consumption may decline significantly. And that could fuel a recession. This is what many people fear.

Now, the beacon of hope for everything so far has been a solid labor market. In fact, many financial experts believe a recession may be imminent, but admit that it won’t necessarily be dramatic or prolonged.

But recently, Jamie Dimon, CEO of JPMorgan, said something terrifying about the economy. And this is a caveat worth noting.

What could be worse than a recession?

Dimon acknowledges that the U.S. economy is doing well right now, but he believes things could easily get worse. He also said there was a 20% to 30% chance of facing “something worse” than a recession in the short term.

Now, from an economic standpoint, when we think of worse than a recession, we tend to imagine a full-blown recession. It’s a really long economic decline. But to be clear, Dimon isn’t saying we’re confident we’re headed in that direction.

How to prepare for a recession

The reality is that even seasoned economists can’t always predict with certainty if, when, and how much a recession (or worse) will occur. Sometimes you have to run these situations to run your course. But preparing for a recession is never a bad idea, especially in light of all the warnings we’ve heard.

One of the best ways to prepare for a recession is to increase your emergency fund. In the wake of the pandemic, many experts are advising people to save more than the previously recommended three to six months of living expenses. Others, like Suze Orman, think 8 to 12 months of bills is a better amount to keep in a savings account. So the closer you can get to that mark, the better.

At the same time, it’s beneficial to do what you can to reduce costly debt. I don’t want to keep a balance on my credit card because interest rates could rise further. Also, if your finances take a turn for the worse, you definitely don’t want to worry about large monthly payments.

Finally, do your best to improve your job skills. There’s no guarantee they won’t be laid off if the company is forced to downsize, but it might be less likely. It also improves your ability to get a new job if you are laid off.

All in all, this isn’t the first time Dimon has issued dire warnings about the economy this year, and it probably won’t be the last. The best thing to do is to stay calm, but be prepared for things to go wrong.