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For the last five years, people have murmured about recession.
We had so much upheaval during the pandemic between business and workplace effects, global supply chain disruptions, housing shortages, etc. that it felt like economic problems on the horizon were inevitable.
But the American savings rate also peaked during that time. People who normally were taking vacations, socializing out and about, and filling up with gas for the daily commute to the office were suddenly banking that money instead. Even appliance and construction costs made home improvement projects sit on the back burner.
However, as life became unrestricted again and our supply chains evened out, people made up for all that lost time (and spending) on travel, home improvements, and the like. I think that uptick in spending, supported by unusually padded savings accounts, helped bolster the overall economy a bit as we came out of pandemic life.
But it also helped drive the inflation we saw, combined with record low interest rates, private equity ownership sinking its teeth into everything possible, and a host of other macro issues. But despite all the issues, a recession still wasn’t happening.
I had grown frustrated continuing to hear the recession chatter through 2023 and 2024.
But…
I can’t pretend I’m not a little nervous now.
We’re not fully recovered from the inflation of the past couple of years. Yes, inflation rates have somewhat normalized, that doesn’t mean prices fell back to their 2019 levels. It only means they’re rising at closer to normal rates.
And wages haven’t quite closed the gap because those tend to lag and unemployment has been eeking back upward, after having normalized a year into the pandemic.
Then, instead of having some space to breath and close that gap, the economy is now starting to convulse with the effects of trade battles, or even the threat of them, attributable to U.S. actions on tariffs. I’m no professional economist, but when stock markets lose six months of growth and U.S. treasury yields aren’t up either… I get a little wary.
Feeling wary is a sign to pay attention, not to panic.
Where I live, many people work for the federal government, as I did until 2021. Conversations about preparing for a shift in circumstances are happening in households all around my network.
But I think those contingency plans aren’t just for my neighbors and former colleagues. I think it’s what we all need to do, whether you’re worried about job loss, rising prices, or a stagnant (or further falling) stock/bond market as you near or begin retirement. Things may very well smooth out, and I very much hope they do, but an ounce of preparation is worth a pound of cure.
You must know what you’re willing to take on. You must know what you’re willing to give up. You need to identify the levers you can pull if you must, so you already know what you would change if it became necessary. It’s all about preplanning contingencies that keep the long view in mind, but allow you to stay nimble in a thoughtful, prioritized way if flexibility becomes required in the short term.
Anytime is a good time to know where your priorities lie, to diversify your income streams, to identify where your financial flexibilities are. But if you haven’t thought about it in a while, now may be the time.
The flexible are the ones who prevail and the stubborn are actually brittle and break in the face of challenge or something that they need to adapt to…
James Clear, interview on Good Inside podcast
Rigidity is fragility. Formlessness is unbreakable.
Ryan Holiday in Discipline is Destiny
I hope you enjoyed this edition of Under 2, an email series designed to share quick bites of wisdom to empower your financial journey (while keeping it short). Be sure to sign-up below to get these messages in your inbox.
All for now,
Lindsey