Question: I’ll turn 25 in December and am in line for a major promotion at work. I grew up during the Great Recession, so I’ve been very careful about not blowing my money on a house or an expensive car. I live in a modest apartment and still drive the Honda I had in high school.
Thing is, I still have $14,000 in student loans to pay off, and a couple grand on my credit cards from last holidays. I have an emergency fund of $1,200, and no other debts. But what if there’s another recession in my lifetime? What can I do to prepare better than my parents, who lost their jobs a year apart and were already seriously in debt when that happened?
This has me seriously freaked out.
— Rebecca in Rhode Island
Howard Dvorkin answers…
I don’t want to scare you, Rebecca, but I feel safe making this prediction: There will be another recession in your lifetime. In fact, it might be a lot sooner than you think.
While I’ve mused about the next recession myself — wondering if the spark will be an auto bubble, student loans, or even a retirement crisis — other experts have become more emphatic.
Zillow Research polled 99 financial experts, and while their opinions on the date of the next recession varied from the fourth quarter of 2018 (only 4 percent) to the first quarter of 2022 (6 percent), one stat was startling…
Only 1 expert thought a recession would happen after 2022.
I’ve been around long enough not to make predictions about the economy, sports games, or the Oscars. I simply mention this as proof that recessions are a part of life.
Hopefully, the next one — whenever it is —won’t be as devastating as the Great Recession of a decade ago. I’m a CPA and not a psychologist, but it seems like you’re experiencing some post-traumatic stress from your adolescence. I can try to alleviate your stress with some factual advice.
Don’t go for the gold (or silver)
First, let me tell you what not to do. Last year, a reader’s husband wanted to invest in silver, as a hedge against the next recession. While it’s true that precious metals skyrocket in value during economic downturns, it’s also true that they don’t help you when you have bills to pay.
The wife told me the couple still had debts to pay. It makes no sense to prepare for a recession by ignoring bills that come with steep interest rates to buy metals or stocks in them that earn no interest themselves.
You’re in pretty good shape, Rebecca. Your biggest debt is your student loan, and you have options there. While you can’t simply get rid of that debt, you can make a serious dent in it by exploring several proven options — including federal programs that can greatly reduce your monthly payments. Check out How to Get Out of Student Loan Debt.
You’re not alone, Rebecca. Many survivors of the Great Recession are worried about the next one. That’s why Debt.com put together this report: How to Recession-Proof Your Finances. I urge you to read it because I think you’ll find you’re already halfway there.
Have a debt question?
Email your question to email@example.com and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.