Just because the stock market is jittery doesn't mean you have to be.
There is increasing concern about recession in the U.S. This week, the bond market sent a signal that sent stocks tumbling. That combined with other economic and geopolitical disruptions led investors to flee stocks in anticipation of an economic slowdown.
From cutting excess expenses to building up your rainy day fund, here are six financial moves you can make to stay afloat if the economy slows down.
TRIM THE FAT
Do you really need that bundle package from your cable provider, or to pay a gardener to mow your lawn every week? Now might be a good time to figure out what's an essential expense and what you can let go.
"Review the family budget to see what could be reduced or cut if there was a sudden drop in monthly income,'' says Richard Fleming, a certified financial planner based in
Colorado Springs, Colorado. "Be prepared to make those reductions (or) cuts as soon as it becomes necessary."
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Devin Pope, partner and senior wealth adviser with Albion Financial Group in Salt Lake City, Utah said there are software programs or apps, such as Mint or You Need A Budget, to help you figure out your budget.
"Having a tool that tracks your spending will be very helpful,'' he says. "This way you know what is available to cut. If you don't track your budget, now is a good time to start."
INCREASE YOUR EMERGENCY FUND
If the economy does take a dip, it's a good idea to make sure you've socked away as much as you can for a rainy day.
"I think the greatest fear when the economy slows down or goes into a recession is that income will be impacted, either hours cut back or worst case, (your) being laid off," says Kenneth Perine, a certified financial planner with Meritage Wealth Advisory in Livermore, California. "It's times like these that having an emergency fund in place really pays off. Not having to live off credit card debt can keep you out of a hole that can be very difficult to dig out of.''
Try to set aside enough money to cover at least three months of expenses. "But expanding that to 12 to 18 months, or even 24 months is not unreasonable if people want to err on the side of caution,'' says Chuck Failla, a principal with Sovereign Financial Group in New York City.
PARE DEBT, BUT HAVE A BACKUP
If your income shrinks, you won't want to be on the hook for expensive debt you have to repay.
"Pay down those credit card debts and any type of high-interest loans you might have,’’ says Failla.
But Dennis Nolte, a vice president at Seacoast Investment Services in Winter Park, Florida, says that "besides cutting debt, I'd work on ensuring folks have access to credit (and) liquidity. ... No one likes giving you a line of credit if you have no income stream from which you can pay back the loan (or) interest.''
Consider obtaining a home equity line of credit that you can tap in an emergency, Nolte says. And in addition to putting money toward high interest loans first, "keep chucking money into a Roth IRA, where all contributions can be withdrawn tax and penalty free at any time, as a potential source of cash if you lose your job, or income to the household gets cut,'' he says.
THINK ABOUT YOUR INVESTMENTS
Some financial professionals recommend taking a look at your portfolio, preferably with the help of an expert, to make sure you're properly diversified and not at excessive risk if stock prices drop and take time to rebound.
"The volatility we saw (Wednesday) is a reminder you can’t be complacent with your portfolio,'' says Failla, adding that you should check to make sure your more aggressive investments are for the longer term.
But proceed with caution, says Kenneth Waltzer, a co-founder and managing director of KCS Wealth Advisory in Los Angeles.
"One should never change investment strategy in response to market or economic conditions, as this amounts to market timing, which has a dismal record, even among professionals,'' Waltzer says. An investor should use moments of market instability "to make sure that his or her investment strategy remains appropriate for their risk capacity and stage of life.''
STAY ON THE JOB BUT STAY PREPARED
If you've already built up a track record at your current job, you might not want to start looking for a new gig during a time the economy is stuttering.
"Try not to make a career move right before an economic slowdown,'' says Aaron Clarke, a wealth adviser with Halpern Financial in Ashburn, Virginia. "It’s never good to be the new kid on the block when financial limitations may become strained.''
But just in case layoffs loom, it's a good idea to be prepared by honing your skills.
"Take advantage of employer training or education programs to bolster your skills,'' says Eric Walters, a financial planner in Greenwood Village, Colorado, who also recommended spending "30 minutes each day reading a book related to your industry and personal leadership to help you perform at a higher level and offer more to your company.''
ZERO IN ON YOUR 401(k)
If you reduce your contributions to your 401(k), and choose to put that money into a savings account instead, you could lose out financially in the long run.
"Stay the course,'' Fleming says. "Keep contributing to your employer-sponsored retirement plans and IRAs. Continue to dollar cost average, even in a downturn. You are in it for the long haul.''
And Edward Snyder, a certified financial planner with Oaktree Financial Advisors who is based in Carmel, Indiana, believes you might even want to invest more than you've done previously.
"If the stock market is down you should try to increase contributions to your 401(k),'' he says. "You will be buying shares at lower prices so you’ll get more shares for each dollar invested.''
Follow Charisse Jones on Twitter @charissejones
This article originally appeared on USA TODAY: Is a recession coming in 2019
