8 Reasons You Should Behave Like the US Is in a Recession Even Though It’s Not

The U.S. may not be in a recession now, but many Americans believe it is, according to the Consumer Sentiment Index at the University of Michigan. This is likely because of record high inflation , which has driven up the costs of living and eroded Americans’ buying power.

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True recession indicators typically include a host of warning factors, like lower gross domestic product (GDP), higher unemployment, lower consumer expenditures and more complex economic concepts, such as an inverted yield curve. So far, the U.S. economy is staying ahead of a true recession, but experts hint that one could be coming.

While nobody wants a recession to come, there are some good reasons to behave as though we’re already in one, to ensure you’re financially prepared in case it comes to pass .

It’s Never a Bad Time To Change Spending Habits

One reason to behave like the U.S. is already in recession is that it can get you to change spending habits that aren’t working well for you, according to Dana Ronald, CEO of the Tax Crisis Institute .

“While the economy may appear stable, preparing for a downturn can bolster financial resilience,” Ronald said. “Acting as if a recession is imminent encourages prudent spending and saving habits, allowing for better cash flow management.”

Doing so now might just reveal cash you didn’t know you could put toward savings or investments.

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It’s Better To Be Proactive Than Reactive

In uncertain economic times, proactive financial behavior is key, according to Kris Mullins, the chief marketing officer at Capital Max .

“Even if a recession hasn’t been officially declared, the warning signs are enough to start taking action … We stress on treating these indicators seriously, so you don’t get surprised when the economy changes its direction,” he said.

He added that financial preparedness helps you avoid panic and build resilience.

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You Won’t Be Caught Off Guard

While the economy may not be in a recession now, indicators like rising interest rates, inflation and geopolitical instability suggest that a slowdown could be on the horizon, according to Dennis Shirshikov, a professor of finance at City University of New York and a finance and real estate expert with GoSummer .

“Preparing in advance means you won’t be caught off guard if and when the economy does take a turn for the worse,” he said.

It Can Help You Pay Off Debt

Another reason to behave as though we’re in a recession is to minimize or eliminate high-interest debt, Shirshikov said.

“During a recession, cash flow can become tight, and carrying significant debt can quickly become unmanageable if your income decreases,” he said.

By prioritizing paying off credit card balances, personal loans and other high-interest debt now, when you have more financial flexibility, you can reduce your monthly financial obligations and increase your ability to save and invest.

It Can Help You Trim Your Budget

Acting as though a recession is coming can also help you to reassess and trim your budget, Shirshikov said.

“This might involve cutting back on non-essential expenses or postponing major purchases. By doing this now, you can redirect those funds into savings or investments, strengthening your financial position,” he said.

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You Can Build or Strengthen an Emergency Fund

If a recession might lead to possible job loss, prepare now by making sure you have savings equal to six to 12 months of living expenses, Mullins urged.

“This can help shield you from job loss or unforeseen costs that often increase during economic downturns.”

You Can Increase Your Income

Now is also a good time to think about alternative ways to earn income, Mullins said.

“Having different sources of income can be very useful if the main source stops giving money,” he said.

Shirshikov agreed, saying, “Relying on a single source of income can be risky in a volatile economy. Consider developing side hustles, freelancing or investing in income-generating assets. This not only increases your financial stability but also provides additional resources if your primary income is impacted by a recession.”

It Will Help You Diversify and Reassess Investments

If you’ve been coasting on your investments for a long time, it might be time to diversify.

“Change to less risky, recession-proof investments, such as bonds or defensive stocks, to shield your portfolio from turbulence,” Mullins said.

In essence, behaving as though a recession is coming is an opportunity to curb excess spending, get out of debt and save more money, habits that can only make you financially stronger.

This article originally appeared on GOBankingRates.com : 8 Reasons You Should Behave Like the US Is in a Recession Even Though It’s Not