If you’re worried about a recession in 2023, you’re not alone. It's a big topic in the news and at the dinner table. We also understand how overwhelming it can be to hear the many opinions on how to best prepare. At Churchill Mortgage, we like to say "control the controllables" during times of uncertainty. That’s why we’re sharing six quick tips to help you feel secure, no matter what comes next.
1. Pay down debt: If you have credit card (or any other debt) keep paying on it. Saving is important when preparing for a recession, but it won’t help to ruin your credit in the process. At the very least, continue to make minimum payments.
2. Revisit your budget: It’s always good practice to tighten up your budget every 6 months and check in on any unnecessary cash flow. When you do this, you may find it’s time to cut back on expenses and allocate funds differently. For example, are there areas where you’re spending more than you need to? Can you cut back on any non-necessities such as eating out or streaming services?
3. Save money: Once you’ve re-assessed your budget, and have a plan to pay off any debt, do what you can to save. Pad your emergency fund and savings account as much as possible. You want to make sure you can cover your mortgage/rent, car payment, utilities, gas, and groceries all while meeting the minimum payments on any debt. Ideally, you will want three to six months of living expenses saved in an emergency fund. However, if you need to borrow from savings during a recession because your emergency fund isn’t as full as you’d like, it’s okay.
4. Avoid taking on additional credit card debt: Credit card debt is up 15% for Americans. That’s the highest annual jump in over two decades! It may be tempting to get a high-limit credit card or a new lower interest card, but now is not the time to take on more debt. Instead, buckle down and get lean with your budget. If you currently use credit cards, try to use them sparingly (if at all).
5. Check investments: If you have a portfolio for retirement or otherwise, sit down with your financial advisor and look it over. It may be time to pull back on investing in a particular area and to spread the wealth between investments like real estate, stocks, and bonds to help secure your assets.
6. Build wealth through homeownership: If you’re financially ready and able, start building equity through real estate. Each month you pay rent results in a missed opportunity to build wealth. Real estate (specifically residential) is still one of the safest investments you can make and has done historically well during past recessions. As inflation moves lowers, mortgage rates should follow which will add demand to a market that already has limited inventory. That’s great news for home buyers (and home appreciation) in 2023!
The Bottom Line:
More than anything, don’t let fear get the best of you! The United States has gone through 13 separate recessions since World War II, with an average timeline of 10 months. This isn’t to say your fear isn’t valid. After all, the recession of 2020 caused the GDP to fall 31.2%. Before that was the Great Recession of 2008 lasted 18 months.
Luckily, circumstances are not the same as they were then. 2020 was unlike anything we have seen before, with unemployment and government spending skyrocketing. 2007-2009 was due to high-risk mortgages. We aren’t dealing with either of those issues now—unemployment is steady and lending laws have been updated to protect buyers.
The best thing any of us can do is show up for ourselves and our families well through saving, paying down debt, and staying well-informed with facts, not opinions. Churchill Mortgage is here to help you navigate any questions you may have about your current home loan, or to help you make a move when you're ready!