How to Avoid Financial Panic When a Recession Threatens – Kiplinger’s Personal Finance

It’s OK to worry about a potential recession. The unknown is scary. But, don’t let those emotions lead you into financial panic.

You are not the only one feeling anxious – more Americans are worried about a looming recession than in years. Two-thirds of Americans (66%) say they are expecting a major recession right around the corner, according to the 2022 Q2 Quarterly Market Perceptions Study* from Allianz Life Insurance Company of North America. At this time last year, fewer than half (48%) expressed concern about a recession.

The anxiety about a potential economic downturn makes sense. Recessions are times of significant decline in general economic activity that are part of the regular economic cycle. What’s tough is that we often don’t realize we’re in one until it’s in full swing. And, we never know how long the decline will last or how low our investments will fall.

Every recession is different. The 2008 housing crisis was completely different from the 2020 COVID-19 recession. If we are in or falling into a recession now, it will be unique too, with the stock market dropping into bear market territory and inflation at historic levels, but unemployment, so far, still historically low.

Many people are looking for guidance on how to prepare for or navigate another recession, especially during this time of record inflation. Changing your spending habits could help in the short term. The cost of goods has increased, so trimming expenses where you can would help your bottom line right now. But, fewer meals out and more at home, or purchasing generic rather than brand name products isn’t going to set you up for long-term financial security

While our focus often shifts to short-term needs during times of economic decline, it’s important to keep a long-term view of your finances, particularly when it comes to things like retirement planning. Take measured steps now to help create a secure financial strategy for your retirement, even when – or perhaps especially when – your retirement may be years away.

Here are a few ways to keep your worry about a recession from leading to panic.

Review your financial strategy

When financial factors outside of your control start to play with your emotions, it is time to revisit your written financial plan – and stick to it. Ideally, you should have a written, detailed financial plan to consult that was created with the support of a financial professional that provides for contingencies during stressful times like these. If you do not, the best time to create one is now.

A good financial plan will have addressed potential risks to a retirement strategy like inflation, a market downturn or a …….

Source: https://www.kiplinger.com/retirement/retirement-planning/605148/how-to-avoid-financial-panic-when-a-recession-threatens

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