August 12, 2022
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Money Hacks

How to prepare for a recession

Recessions are out of our immediate control but luckily, Cleo's got some top tips💡

Though it seems unfair, there's still no Sims-esque hack for multiplying our money (we'll let you know as soon as we find one).

Last week, both President Joe Biden and Federal Reserve Chair Jerome Powell said the U.S. hasn't yet hit a recession, however, irrespective of the country's economic standing, it's pretty obvious consumers are struggling with inflated prices and the cost of living.

In fact, nearly half of people in the U.S. have said they're falling deeper in debt, aren't able to keep up with the rising prices, and have way less money to save for emergencies.

During a recession, people may experience significant impacts on their daily lives, that's why it's important to prepare for a recession by optimizing your financial support system 🚀

WHAT IS A RECESSION AND HOW TO PREPARE FOR ONE?

Simply put, a recession is when the economy stops growing and starts shrinking.

Forbes describes it as a "significant decline in economic activity that lasts for months or even years", and while tricky to quantify, economists generally define a recession as at least two consecutive quarters of a country’s GDP (gross domestic product) trending negatively.

Look at you getting a refresher on all these fancy terms that you definitely snoozed through paid attention to in economics class 👀

DOES YOUR WORK, WORK?

In market recessions, not every job is sustainable, and any of the business's non-essentials are first to go. (Unlike our takeout habit, which you could say helps keep our favorite restaurants in business. You’re winning on the technicalities.)

Start preparing for a hit by strengthening your standing (recession or no recession):

💙 Build on what you have: expand your skill set by utilizing free online tutorials and/or grow your LinkedIn network so that you’re always on a load of people’s radar. Smart, capable AND prepared? You triple threat  ✨

💙Start a side hustle: whether it’s a passion project or purely practical, extra money can come in from things like babysitting, cooking for delivery and running errands. Sell stuff you don’t need. Marie Kondo the shit out of your possessions. (Does money bring you joy? YES.)

By having multiple sources of income, if one takes a hit you have the other to help bankroll you so that you can still treat yourself a little bit, and at the very worst still get the hell by

And if you need any side hustle ideas, check out the best side hustles we found in 2022.

WHY IS BUDGETING IMPORTANT?

Yeah, Starbucks iced coffee is great, but do you need two every Friday?

65.3% of Americans have banking apps to keep track of their spending. Being aware of how much is in your account is great, but if you’re not managing or budgeting too, then the 'keeping track' part is probably going to look like you squinting with sweaty palms as your bank balance screen loads.

The toughest truth to face head on can be determining our wants versus our needs. By consistently asking yourself whether or not a purchase is essential, you’ll be a self-serving machine, able to fund your needs without the stress sweat and sleepless nights. Well, money ones at least. It is 2022.

(Clears throat) Cleo will give you personalized updates, advice on spending reactive to how you feel about certain purchases, automatically put a little money aside when you spend somewhere you’ve said you don’t want to AND roast you for going to McDonald's five times in one week.

She’ll also always hype you for getting by and/or thriving. She wants you to succeed.

BUILD THAT EMERGENCY FUND

If you’re feeling anxious about money right now, you’re not alone. 56% of Americans can’t cover a $1,000 emergency expense with their savings.

Check out how much of your income should go to savings for a few helpful tips 💡

Set a goal to have enough cash stashed away to get you through a few months’ living expenses. Ideally, three to six months is the sweet spot. If that feels intimidating, no worries. Start with a smaller goal, and be sure to reward yourself when you get there.

Here’s how to get some savings started whenever you have a little to roll with:

💰 Funnel small (can be small small, like teeny tiny small, whatever you can manage) into a savings account each month consistently

💰 Find a savings account with a high interest rate

💰 Find a savings account with no penalties or restrictions

Nerd Wallet’s got an emergency fund calculator you can use for tips on how much you might need to keep saved 💸

PLAY THE CREDIT SCORE GAME

35% of your credit score is your payment history. This may come as great news to some of you – just because the economy has taken a hit right now, doesn’t mean your score or your future wealth has to suffer.

The way your credit score is calculated may not feel like a whole load of sensible, but it matters. A good credit score opens all kinds of doors to when it comes to borrowing money, including lower interest rates and penalties.

This also means that your hard-earned cash will go further. Those interest rates and extra fees can get you hard. Whether you’re balling out on a Range Rover or scouring the web for anything that won’t break down on you in that sketchy area of town will likely be decided (at least partially) by your credit score.

Tired of your cramped apartment and roommate that you know eats your Nutella and has a funky smell you’ve never quite been able to put your finger on? Ew. Working on your credit could literally open the door to a nicer, roommate-free place – or even a mortgage.

An added bonus to leveling up your credit game is seeing an overall reduction in both your short and long-term costs on the “needs” in your life.

What do you win? An easier, less costly path to reaching your short and long-term goals… and more pizza.

Here's how to play:

🚦 Get a credit card, keep the balance real low, and pay it off regularly. Make your payments early when possible

🚦 Not everyone can do anything other than paying the bills at the moment, but luckily another best practice is to pay your bills on time in full

🚦If you have a high-interest loan that you’ve been consistently paying on time – refinance it when you can. This could lower your interest rate, monthly payments and the overall amount interest that you pay over the lifetime of the loan

YOU’VE GOT THIS 🚀

When we’re dealing with something pretty out of control, the way we approach it is the one thing we've got power over.

Like most things in life, the economy is cyclical and historically for every downturn there’s an uptick to look forward to. Warren Buffet is the man when it comes to long-term thinking, and it shows.


How can you feel cool, calm and collected?

Take a deep breath. This is temporary. You are absolutely not alone

Taking the tiniest steps to prepare for – and face – a recession will give you a much-needed sense of control. (Shout out to your mental health)

Don’t leave self-care on the back burner if you’re able. Hydrate. Feed yourself. Move your body. Get some rest. Watch as many cat videos as you want. Love yourself at least a 10th of the amount that Kanye loves Kanye

Now fly high, you recession-proof financial warrior!

And if you’re ever in an emergency and need funds to cover you until payday, Cleo can spot you up to $100. There are no credit checks, no interest, and we don’t require employment verification (we see you freelancers) ✨**

Enjoy this post? Give it a share or send it along to a friend. You never know, it could make a big difference. And of course, if you want to try the best money app in the world for free, just hit this link right here.

Big love. Cleo 💙

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