NEW YORK (MainStreet) — Each month, new surveys seem to show that an increasing number of Americans are worried that another recession may be just around the corner, with one Bloomberg survey out this week showing that just 9% of the country feels confident that we won’t experience a double dip. Whether the U.S. will be hit by another recession remains to be seen, but according to some financial advisers, households would benefit by preparing for the worst now.
“We should probably all live our lives as though a recession is around the corner,” says Frank C. Boucher, a certified financial planner with Boucher Financial Planning Services. “I’m not suggesting we live like monks, but you should figure out what your financial goals are and live within your means.”
As Boucher points out, much of the reason households were so devastated by the Great Recession was simply because they had been living so far beyond their means, racking up credit card debt and signing up for mortgages on property well above their income level. In the years since the recession officially ended, many households have worked to improve their own balance sheets, but in order to withstand another economic downturn – or even just a turbulent economy – Boucher argues that consumers need to take three key steps.
Build Up Six to 12 Months of Emergency Funds
More than anything else, Boucher says households should work to build up their cash assets by placing more money in savings accounts. Just how much one should save depends on the number of income earners in the household and how stable that person believes his or her job situation to be.
If you are the sole income earner and are worried about your job security, Boucher recommends having enough emergency funds to cover one year’s worth of expenses. For households with two or more income earners, each should strive to save up to six months of emergency funds.