I wish we’d been wrong about how bad things would get when some very powerful men started ignoring the Constitution in order to decimate the federal government and enrich themselves. But as it turns out, it’s even worse than anticipated! And this is only the beginning.
Even if your job isn’t one of the many thousands under direct threat by the Trump administration’s widespread cuts, you’ve probably noticed an ominous chill. Perhaps you work for a university that’s had its budgets slashed. Maybe your employer is reliant on materials that are suddenly much more expensive. Or you’re simply freaked out by higher-than-ever grocery prices and unusual warnings when you check your 401(k). Even the most restrained economic headlines look sinister.
Sure, we’ve heard warnings of a recession for years. But this moment is different. “I don’t think the atmosphere has felt this bad since 2008, 2009,” says Mary Clements Evans, a certified financial planner and the author of Emotionally Invested: Outsmart Your Anxiety for Fearless Retirement Planning. “We’re not in a recession yet, but there’s a lot of confusion and uncertainty. Job loss seems to be happening at random, without notice or appropriate safety nets.” So, how are we supposed to prepare for a downturn when the usual guardrails are gone? Here, financial experts share what they’re telling their clients, and doing themselves.
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Consider opening an emergency credit card or two.
Obviously, the best way to prepare for a recession and/or layoffs is to save up an emergency fund. But that’s annoying advice for the 42 percent of Americans who haven’t done so and can’t just snap their fingers and make it happen. If that’s you — or even if you do have a healthy cushion — it never hurts to open a no-fee, zero-interest credit card for a backup, says Georgia Lee Hussey, a certified financial planner and the chief executive of Modernist Financial. “Hopefully you won’t need it, but if you lose your job or have a big surprise expense, you could put it on the zero-interest card and pay the minimums until you get back on your feet again,” she explains. “I’m also asking for credit limit increases on all my credit cards.”
Of course, you want to be strategic about this — opening a bunch of cards and increasing your limits all at once can damage your credit score. “Instead, open one, maybe wait a week or two, see what it does to your credit score, then apply for another one,” she says.
Best-case scenario, you’ll never need to use these cards. You can put one small monthly charge on them (say, a subscription) and set up autopay to keep them active. But it’s much easier to get approved for new lines of credit — especially ones with low or no interest rates — when the economy is relatively decent and you still have a job. Relying on credit cards is never a great option, but it’s better than no option at all.
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Think about switching to a credit union.
“I recommend using credit unions instead of big banks because they are legally required to benefit their members, not shareholders,” says Hussey. Also, they could become a more stable place to keep your money if the FDIC gets cut to the point that it loses its power to regulate banks and prevent bank failures.
“If the FDIC shrinks, there’s more potential for instability in the banking industry,” Hussey explains. “Right now, I don’t trust the federal government to act responsibly if there’s a banking crisis. But I do trust state governments in places like California, New York and Illinois, where there are large financial industries. Those state governments are more likely to step up and secure their state-based banks and credit unions if they need to.” To explore credit unions available to you, check out the National Credit Union Administration website’s locator tool.
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Look into other ways to access money if you need to.
If you haven’t already, make a worst-case-scenario plan, says Evans. Say the economy tanks and you get laid off tomorrow — what expenses would you cut? Would you have to move? Who could you ask for help? What does your support system look like? Is there anything you can sell? It’s horrible to think about, but sometimes going down the doomsday spiral can be a useful exercise. “In times of crisis, you have to look at what’s in your control,” she says. “If there’s a way to enact part of your disaster plan now, in order to save a little bit, do it.”
Evans also recommends exploring ways to borrow cash if you don’t have much of a buffer. For instance, if you own your home, chances are most of your money is locked up in it. In that scenario, Evans recommends opening a home equity line of credit. This is known as a HELOC, and it enables you to borrow money based on the value of your property.
Again, hopefully you’ll never need to enact your emergency plan or tap into your HELOC. “But it doesn’t cost you anything to have it there, and you want it in place before it’s necessary,” says Evans. “It’s like an airbag. If you crash, you’ll be glad you have it. A HELOC is much cheaper than most credit cards. Then, once you get re-employed, you can pay off anything you’ve borrowed more quickly.”
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Don’t mess with your 401(k).
To whatever degree that it’s possible, keep contributing to your 401(k) or other retirement plan. The market being down is no reason to stop or change course — if anything, it’s a reason to keep going, says Patti Brennan, a certified financial planner, the president and CEO of Key Financial and the author of Am I Going to Be OK? “It’s a great deal! You are getting more shares for the same amount of money! The fact that it saves taxes is the icing on the cake,” she explains.
And if you’re wondering if you should change your investments, don’t. “The time for those decisions was long before this correction. It’s too late now,” she says. You never want to sell stocks when they’re down or buy others when they’re up — you’re better off riding this out as best you can.
The good news is that the U.S. economy is strong no matter who’s in power. “Most recessions are over within two years,” says Evans. “I’m not saying bad things aren’t going to happen. They’re already happening. But as far as your investments are concerned, if you have a well-diversified portfolio, you own parts of really good companies that are mostly going to survive and grow.”
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Don’t panic. Recessions are to be expected, and they do end.
Nothing about this moment in politics is normal. But recessions are. “We should expect downturns to happen, on average, every five to seven years. So there’s nothing wrong with markets going down — it’s part of the cycle of expansion,” says Hussey.
In the meantime, Hussey recommends channeling your anxieties into other actions. “Volunteer, get involved, limit news and market intake to help manage your nervous system, do some financial spring cleaning if it makes you feel better,” she says. Also, have conversations with people who’ve experienced what we’re potentially facing. “Talk to people from other countries that have been through coups or faced major upheaval and ask them how they got through it,” she says. “If you weren’t deeply affected by the last major recession, find someone who was and ask them what they did.” Their stories may not be comforting, but they will give you an idea of what’s possible, and what resilience can look like.
Finally, think about what you’re currently doing with your resources — which include money as well as time, skills, and relationships. “We have a lot of power in our purchasing decisions,” says Hussey, who recommends Progressive Shopper, a free plugin that enables you to see whether a retailer supports your values. “There’s a lot that’s outside of our control, but there’s also a lot of things we can do.”
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