If you’ve listened to or watched the financial news lately, you’ve probably heard of the term, “recession”. In fact, not so long ago *cough* 2022 and 2023 *cough*, the financial experts were predicting we would be in a recession now. However, lo and behold, it didn’t happen, a recession didn’t materialize. We then began hearing another term “soft landing”, meaning the economic growth would slow gradually while managing to keep inflation in check, not too low and not too high. Well, that doesn’t seem to be happening either. So now a new term, at least to me, is being introduced into our financial vocabulary, the experts are discussing an economic “no landing”.
An economic “no landing”, to me, sounds like the economy gets stuck or is suspended. We have a combination of our economy continuing to grow, with consumer spending at current levels or even moving slightly higher, PLUS having higher than expected inflation. A no landing is the proverbial “stuck” scenario in which both prices and inflation stay high, while businesses and the markets keep growing.
What does that look like for you and me? Groceries, consumer goods, will remain high. Also, expect higher interest rates on all forms of credit. Both of those translate into less money going to our personal bottom line for discretionary spending. When the necessities cost more, something has to give. Our already stretched budgets may be called upon to stretch even further. You can also expect higher interest rates on credit cards, mortgages, car loans and etc.
So what can we do? The first thing I would suggest is to complete a full review of your financial situation, starting with your budget. Comb through for expenses you can reduce and/or eliminate. This is a good exercise no matter what the economic outlook is, but it becomes more critical during tighter times.
Next, take a look at your discretionary spending. Again, we are looking for areas we can reduce and/or eliminate. How deep you cut your budget depends on your financial situation and what you foresee coming in 2024. Has your company begun curtailing overtime, limiting travel or other company expenses? If so, it may be time you do the same.
Another idea is to begin reducing, eliminating and/or avoiding debt. Getting out of debt or lowering it, not only can provide breathing room in your budget, but also reduce the total cost of the debt. In addition, if you can save up for an item and pay cash, you can avoid paying additional interest and adding debt to your financial situation.
My final suggestion is to build up emergency savings, just in case. It doesn’t have to be a huge amount. Its purpose is to introduce breathing room into your financial situation. If you also have debt to pay down, consider dividing your cash between debt and savings. Continue the split until you have a financial cushion you are comfortable with. After that you may want to focus solely on paying down debt.
Final thoughts. No matter our economic circumstances, recession, soft landing or no landing, continue to keep in mind, “This too shall pass”, and it will. We just have to be prepared to ride it out and make it through.
Data Sources and More Information at…
https://www.investopedia.com/terms/s/softlanding.asp
https://www.investopedia.com/terms/r/recession.asp
https://www.cnbc.com/2024/01/29/soft-landing-or-no-landing-economists-weigh-in-ahead-of-fed.html
https://finance.yahoo.com/news/economy-could-store-no-landing-191646385.html?fr=sycsrp_catchall
Until Next Time♥…
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