We are still feeling the impact of the Covid pandemic some three years after it began. While the health challenges are still there, they are not the focal point now. We are now struggling with the economic decisions that were made during the pandemic.
The government pumped a lot of money (stimulus) into the economy during the pandemic. That money went to individuals and businesses. As that money was ultimately spent, it was inevitable that those actions would be inflationary. Rising inflation was an economic factor that the US economy dealt with in 2022 and the beginning of 2023.
The Federal Reserve’s primary tool to fight inflation is to increase interest rates. The interest rate has been increasing since early 2022. The goal of increasing rates is to slow the economy down. The rising interest rates have also caused the nation’s banks to have some stress. The banking issues will also cause the economy to slow down. The ultimate goal of the Federal Reserve is to slow the economy without sending it into a recession.
The textbook definition of a recession is two consecutive quarters of negative real GDP.
To summarize, so far, the U.S. economy is facing raising rates, increase prices on the things we buy (rising inflation) and the real possibility of a recession.
The impact on our personal finances is real. Everything seems to cost more and the news we see is not positive. The result is we don’t “feel” good about our circumstances.
What should we do to prepare our finances for whatever lies ahead?
- Make sure the emergency fund is completely funded.
- Have your budget at hand and stick to it.
- Do not use credit cards if you can’t pay the balance in full.
- Keep your car maintained to last longer.
- Keep fueling your retirement plans (lower stock prices will mean your investment dollars are buying more shares.)
- Stay informed about what’s going on with the economy.
With the proper preparation and staying informed, you can navigate whatever the economy throws at you.
Handle it your way.
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