Bankrate: 4 in 10 Americans Not Ready for a Recession

Lomas: Having six months' savings will help in case of a recession

Tom Puckett
October 17, 2019 - 4:00 am
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Buffalo, NY (WBEN) Are you ready for a recession? A new study says 4 in 10 Americans are not.

new Bankrate survey finds 4 in 10 ill-prepared if an economic downturn hits in the next six to 12 months. This includes roughly 41 million (16%) who say they are not at all prepared. Despite recession fears, nearly one-third (31%) are not doing anything to prepare for an economic slip.

What’s worse, of those who are not actively taking steps to withstand the fallout of a declining economy, nearly half (46%) believe they are not prepared. This includes 29% that are not at all prepared. Meanwhile, in order to weather the next recession, the survey finds 44% of U.S. adults are actively spending less money, 33% are saving more for emergencies, 31% are paying down credit card debt, 15% are saving more for retirement, 10% are looking for a better/more stable job and 4% are doing something else.

“The most common step U.S adults are taking to protect their finances in the event of a recession is to spend less money. This is notable because more than two-thirds of economic output is tied to consumer spending,” says Greg McBride, CFA, chief financial analyst for Bankrate.com. “Saving more for emergencies and paying down credit card debt are especially important steps to be taking as fewer than 1 in 5 households has sufficient emergency savings and the average credit card rate is over 17%."

"It doesn't surprise me at all," says Mike Lomas of the Financial Guys "I've been reading statistic after statistic year after year talking about folks not being prepared for retirement so it doesn't surprise me folks aren't read for a recession." Lomas says when a recession hits, unemployment goes up and some people have cash flow issues, and don't have enough set aside. "On average, you should have six months worth of cash set aside so you're prepared for that," advises Lomas. He recommends putting some money in bonds or other investments away from the stock market as well.

Another way is to prepare to be more marketable to employers. "They're also not training themselves to do other things, so for example, if I'm a welder, I should get certified and trained to do something else because if I lose my welding job, I might be able to fit a different niche," explains Lomas. He also suggests looking at things you don't need to spend money on short term to have more cash on hand. 

How close could we be to a recession?  "The bond market has been predicting it off and on for months," explains Lomas. "It's sort of funny because talk of a recession often leads people to not buy that luxury car or large TV I wanted because there might be a recession coming, and there's less consumer spending and that's what leads to a recession." He says sometimes people talk their way into a recession and sometimes they can talk themselves out of it. Lomas says you don't know when a recession will happen but it will eventually happen as it's part of the economic cycle. 

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