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It’s not an ideal situation, but it’s set up to handle it.

Key Point

• If a recession hits next year, my income could drop considerably.
• I hope that doesn’t happen, but I prepared myself financially to handle such a scenario.
• I have a lot of emergency funds and my husband’s income is enough to support our family.

Will we enter a recession in 2023? There is reason to believe that it may be so.

The Federal Reserve has been pushing aggressive interest rate hikes to slow the pace of inflation. If interest rates rise and borrowing becomes too expensive, consumers are likely to cut back on spending, thereby closing the output gap that caused inflation to skyrocket. But cutting spending too much could spur a recession and lead to rising unemployment.

As a freelance writer, I am well aware that my work volume may decrease in 2023 if my clients do not want to spend so much on my services. increase.

Of course, it’s not an ideal situation. But that’s not what I’m panicking about either. Here’s why:

I have a lot of emergency savings

In the wake of the pandemic, some financial experts are urging consumers to increase their emergency funds. The old custom required that from three months he had enough savings to cover six months of living expenses. The new competition seems to be 8 to 12 months.

Savings has always been a priority for me, so I have enough cash in the bank to cover a year’s worth of bills. So we know we have reserves available should the need arise due to reduced income.

My income is not used to pay for necessities

When my husband and I budgeted at the time, we knew we needed some leeway to account for the reduced income due to lack of work and childcare constraints. You have incurred essential expenses that you can control.

Take housing for example. We can cover our mortgage, property taxes, and related expenses based on my husband’s salary. His salary is enough to buy groceries, pay utility bills, and cover transportation-related expenses such as car insurance and gasoline.

It’s not that my money is useless for the household budget. We use our income for discretionary spending and such, so if our income drops significantly, we will not be able to take vacations in 2023 and our children may have to give up some of their activities. . And if things get really bad, we might have to reconsider things like paying for another streaming service. No. But as long as my husband’s income is stable, we can afford our necessities.

expensive to prepare

I have come to terms with the fact that my income may decrease in 2023. If you’re self-employed or work in an industry that tends to be vulnerable during a recession, you can prepare for potential hits as well. That could mean setting aside an emergency fund, increasing it as much as you can, and making a list of extra expenses you can throw away in case your income dwindles—cable or subscription. box etc.

You might even start thinking about ways to cut some essential expenses. If you own a home, don’t rush to move to a cheap home on your list. But if your apartment lease is coming to an end and you can move around without spending a lot of money (for example, if you have a friend who has a truck), and you’re worried about your income, buy a cheaper apartment. We recommend that you consider doing so. Decrease.

You never know what 2023 has in store for you. But if you’re concerned about maintaining a steady income during a recession, it’s a good idea to increase your savings and make reasonable changes to your spending.