The US Federal Reserve has had to step in due to the Ukraine war and coronavirus pandemic, resulting in inflation hitting its highest point of 40 years. Therefore, stock consumption increased. This month, they have implemented a turnaround on interest rates multiple times and initiated tighter monetary policy. Yet this tightrope act must be carefully balanced as higher interest can reduce inflation and slow economic growth, further fuelling recessionary fears amongst market participants.
Considering the current market environment, financial expert Suze Orman understands that investors are wary and feel compelled to flee from the stock market. Nonetheless, she encouraged against making hasty decisions in an article for “MoneyWise”. Rather than fleeing immediately, she listed five invaluable tips for surviving tough times:
Being Frugal is a Good Idea.
With the easing of coronavirus restrictions, people are no longer restricted from shopping. Yet, if you’re concerned about an imminent economic downturn, then financial advisors recommend limiting your spending to just the basics and saving any additional money. This way, you can prepare for whatever comes next without worrying too much about overspending.
Save Some Money for Hard Times.
If we’re in a recession, there is always the risk of losing your job or reducing your working hours – both are detrimental to income. This is why Suze Orman emphasizes how vital it is for us all to have an emergency fund handy during times like these. Ideally, one should aim at saving enough money equivalent to eight months’ worth of living expenses; but even if that isn’t possible, anything saved will still be better than nothing!
Prioritize Paying Your Credit Card Debt.
According to Suze Orman, credit card debt is likely the priciest loan in terms of interest rates–therefore, her advice is to pay it off quickly or restructure your debt with a more favorable loan. By doing so, you can save money and reduce financial stress.
Don’t Sell Your Stock.
According to Orman, investors who do not need the money from their stock market investments for five years should stay invested. “It is best to refrain from leaving the stock markets if you have yet to,” said this expert. Rather than divest oneself entirely, one can just as easily consider selling off stocks gradually. A decision about investments does not have to be absolute – you don’t need to choose between everything or nothing!
Don’t Put Everything Into Stock.
Suze Orman has long advocated that, due to the volatility of the stock market, you should never invest money in stocks that you will need access to within five years. Moreover, she encourages young people—even during times of economic recession—to put aside as much money for retirement savings as possible; having a financial cushion is paramount.
