If you’re worried about economic volatility, you’re not alone. A recent survey by Magnify Money found that seven out of 10 Americans expect a recession and 59% predict one within the next six months. The survey also revealed that more than two-thirds of respondents feel unprepared.
While economists and politicians debate the current state of the economy, it’s not uncommon for the rest of us to get worried after a quick glance at a pension fund statement. “It’s natural to feel some discomfort in very volatile and uncertain economic conditions,” says Lynnette Khalfani-Cox, personal finance expert and former CNBC reporter, author of Zero Debt: The Ultimate Guide to Financial Freedom. “But there are things you can do to make sure you don’t emotionally overload yourself with fear, panic and worry.” Economic cycles happen all the time, and they may not affect you the way you fear, she says.
If you want to feel more in control of your finances, no matter what the future holds, experts say these tips can help.
Check your cash
To get an overview of your financial health, start with your income and expenses, which can give you a better sense of control during volatile times, says personal finance coach Annette Harris. What do you bring in each month from all sources, including employment, side gigs, and investments? Is it enough to cover your expenses and spend money on savings?
Next, take a close look at your expenses. You might not need to make massive cuts, but there are likely areas where you can cut back painlessly and put that money toward savings, Khalfani-Cox says. For example, a recent study by C+R Research found that people spend about 2.5 times what they think they spend on streaming service subscriptions, music, clothes, and other items, some of which that they may not even use. A few cuts there can be hundreds or thousands of dollars a year.
Adjust your tax payments
It’s not uncommon for people to let employers take a little more withholding or pay a little more in estimated taxes in order to get a big tax refund. It’s like a little windfall. But, these days, Internal Revenue Service employees are struggling to meet time demands, and refunds are increasingly delayed, says Wendy Barlin, CPA, author of It’s the franchise! Simple tips and tricks to find more business tax deductions. Instead, free up that money so you have more cash, which you may be able to use to increase your savings.
Review, then trust your plan
Most conventional wisdom says to “stay the course” when it comes to investing for the long term. Whether you’re working with a financial adviser or simply following the right advice to maximize your retirement savings, switching based on emotions is almost never advisable, says Khalfani-Cox. However, it might be a good time to check in with the financial professionals in your life, including your accountant, insurance broker, and financial adviser, to make sure you’re on the right track financially and that you’re properly insured.
If market volatility is bothering you, you may be too exposed to risk for your tolerance and your investments may need to be reallocated to make you more comfortable. And while you generally don’t want to try to “time the market” by cashing in and trying to predict when an investment will pick up, there may be reasons to sell, including opportunities for tax savings (undoing losses ) and planned sell orders (existing sell orders when an investment falls below a certain price), she says. Otherwise, avoid looking at your statements too often and stick to your plan, she says. And if you invest in your employer-sponsored retirement plan and get a matching contribution, keep doing it; it’s found money, she said.
Rethink your emergency fund
Conventional wisdom says that you should have three to six months worth of spending in the form of savings in an easily accessible emergency fund. But Khalfani-Cox recommends a different approach. Keep a smaller amount on hand – maybe around a thousand dollars – in a savings account as an “emergency fund”. But put the rest of that money in a “rainy day” fund account that offers better returns, she says. You may need a few hundred dollars immediately for an unexpected expense, but the rest should be put where it can earn you something. Consider accounts such as a high yield savings account – now that interest rates are rising, an online bank or credit union may offer accounts with healthy yields – or even a certificate of deposit (CD ) in the short term to obtain a little more return.
Consider a side business
If you’re looking for ways to increase your cash flow or savings, consider a side business, Barlin says. Your job may lend itself to self-employment (if it does not violate your employment contract). Or you may be able to earn extra income through a second job, side hustle, or gig platform. “I love gig work,” Barlin says. “In difficult times, it helps with extra income. In good times, it pays for extra stuff. Just watch out for multi-level marketing “opportunities” where you have to invest money upfront and not get much in return.
Bonus tip: Once you start making money, be sure to set aside at least 15% of your income for estimated quarterly taxes, adds Barlin. Then remit them according to the annual IRS deadlines.
Invest in yourself
Harris says one area where you should splurge is on yourself and stay marketable, especially if you risk losing your job. Now is a good time to take advantage of employer benefits like tuition reimbursement and learning and development programs that can help you hone or acquire in-demand skills, such as popular technology in your sector, soft skills and management skills. If your employer doesn’t offer such opportunities, review free or low-cost options such as LinkedIn Learning, Coursera, or other online course options to help you keep up with changing job requirements.
Checking your finances, bolstering your cash flow, and preparing if you need to make a change can all help you feel more in control during uncertain economic times.