A record-high inflation swept across the US this year, and if experts are to be believed, will hold strong throughout next year. Economists also predict that the US economy will enter a recession by 2023.
Unless you are thoroughly prepared, a recession will destroy your financial health. For businesses and individuals, it is important to study the US economy and start setting up tight budgets to escape the effect of inflation 2023.
Market watchers are convinced that a recession is inevitable as the Fed has mentioned that it will continue to hike interest rates to rein in the four-decade high inflation. But all is not lost, as we have listed down some ways for you to escape inflation 2023. A US recession is not a fixed thing as the job market continues to remain steady.
Preparing for Recession Amidst High Inflation
There is high demand for labor but the market has contracted for the last two quarters prompting analysts to pull up their socks and prepare for the worst.
1. Stock up on Non-perishable Goods
If you are a business, take advantage of the situation and stock up on non-perishable goods. High inflation reduces your spending power as it increases the cost of goods. You must also evaluate your inventory on-site to make the correct decision on the products or services you offer customers.
Rent, gas, and food prices are expected to go up as unstable economic conditions and geopolitical tensions. For individuals careful budgeting can help buy shelf-stable goods in bulk.
2. Reorganize Debt and Borrowing
All businesses have some form of debt. But with high inflation, debt can put you in the red unless carefully managed. Experts recommend refinancing your high-finance debts to fixed-rate interest loans to escape crushing debt during high inflation.
Paying down debts is also a good way to save money in the long-term. As interest rates climb higher, it is best to cut down your debt as much as possible.
You can opt to either refinance your debt or borrow a small amount under government schemes to increase your capital.
3. Build Up Your Emergency Fund
For a business, it is best to have an emergency fund that will allow you to operate smoothly for at least a year, in case of unexpected expenses. Small business owners, especially, must focus on building up their emergency funds to tide over a crisis. Inflation 2023 is set to ravage your finances, unless you go into it with your eyes open.
No matter how desperate you are, do not touch your emergency fund unless all other options have been ruled out. It is prudent to reduce expenses before spending becomes unmanageable.
4. Revisit Investment Strategies
While no one can predict exactly how inflation 2023 will go, it is better to be prepared for the worst although you expect the best. With thorough financial planning, you can even build wealth during inflation.
As stock indices have plunged to new depths, investing in companies or index funds might seem risky. But that does not mean you do have options during high inflation.
If you have cash on hand to spare, consider investing in Treasury-Inflation Protected Securities or TIPS for short. The principal of these government-issued bonds rises or falls depending on inflation and deflation, as they are based on the consumer price index. Another good investment device is the Series I bond that has federal backing.
Advisers also suggest putting off unnecessary purchases until the inflation has cooled down to get more for your money’s worth. Avoid going over budget and taking on more debt during a recession.
High inflation is temporary and part of an economic cycle but high-interest debt can feel permanent. It is also important to take inventory of what you can do without and eliminate those expenses for a financially secure 2023.
