Money Management

Now that’s some happy news. 

If you’re tired of reading warning after warning about an impending recession, that’s understandable. Experts have been sounding alarms for months about an economic downturn. And so it’s hard to feel good about the economy in light of that.

But new data reveals that consumers actually have a pretty positive outlook on the economy these days. In fact, the Conference Board’s consumer confidence index came in at 108.3 this month, which is a notable jump from 101.4 in November. It’s also the highest reading for the index since April.

Consumers are feeling better on the whole

It’s easy to see why consumers might be feeling better about the state of the economy these days than they were a few months ago. First, inflation levels have been cooling. To be clear, living costs are still higher than normal, and many people are being forced to rack up higher credit card balances to cover their expenses. But we’re not looking at the same level of inflation as we experienced back during the summer.

Also, gas prices have come down a lot since peaking mid-year. That, too, could be lending to more consumer confidence.

And finally, the national unemployment rate is at almost its lowest level in 20 years. Not only that, but the gig economy is booming. And despite a recent round of layoffs from major tech companies, there are still plenty of jobs to be had.

Are recession warnings overblown?

The main reason economists have been warning about a recession doesn’t have so much to do with the current state of the economy. Rather, it’s based on fears (grounded ones) that the Federal Reserve’s interest rate policies will fuel an economic downturn.

The Fed has been hiking up interest rates in an effort to slow the pace of inflation. That has, in turn, made it more expensive for consumers to borrow in just about any category imaginable, from auto loans to mortgage loans. If consumers start to cut back on spending to a large degree as a result of higher borrowing costs, it could be enough to bring about a recession.

As such, the warnings we’ve been hearing are legitimate. But whether a recession will actually hit in 2023 is yet to be determined.

It’s possible that the Fed’s interest rate hikes will only result in a moderate pullback in spending, not necessarily a full-fledged one. And in that case, we could be spared a recession.

Plus, when consumer sentiment is positive, that tends to drive people to continue spending. And since it’s clear that consumers are feeling pretty good about the state of the economy, that alone could be enough to prevent a downturn in the new year.

Now without a crystal ball, there’s no way to know what the next 12 months have in store. But it’s also important to keep recession warnings in perspective. They’re meant to encourage people to boost their savings balances — not to scare them for the fun of it. And so while we could still see things take a turn for the worse in 2023, hopefully, all those warnings will have achieved the very important purpose of urging consumers to pad their emergency funds just in case.

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What could a coming recession mean for your job? 

A period of economic downturn throughout the United States seems all but inevitable. In fact, many business leaders and financial experts are warning of a coming recession or are arguing that we may be in one already.

Recessions are marked by a decline in gross domestic product, but they often lead to job losses as companies cut back on employees to go through hard times. Some workers, however, may be more likely than others to lose their positions if and when a recession arrives. Here’s who is at risk.

These workers could be more likely to see job losses, according to some experts

Surprisingly, there’s evidence to suggest that white collar workers could be the most at risk of job losses in an upcoming downturn, rather than blue collar workers. In particular, the Chief Economist at the Milken Institute believes lower-skilled white collar workers in certain industries could bear the brunt of layoffs.

“Covid shifted things around,” Lee told CNN. “In this post-Covid environment, businesses are restructuring themselves. They’re changing the way they operate, they need to get more efficient. And what they’ve done is buy more software, deploy more technology, where they’re thinking ‘I need better-skilled people who work for me.'”

Unfortunately, early evidence suggests Lee may be right and professional workers could find themselves seeing more job losses in the coming months. In fact, the tech industry in particular has started to let workers go.

Meta, the parent company of Facebook, cut 11,000 jobs in November, and Amazon has begun the process of letting 10,000 workers go. Challenger, Gray & Christmas, an outplacement firm, also indicated a total of 31,200 jobs would be cut in the tech industry in November alone.

This could be just the start of a trend that accelerates as companies in the tech sector and beyond are left making hard choices about how to sustain their business and cut costs when an economic slowdown occurs.

How to prepare for a possible recession

Whether you’re in an industry likely to be hit hard by a recession or not, the sad reality is that more people are let go from work during economic downturns — and others see a reduction in income from reduced hours or a slowdown in promotions and raises.

It’s important to get ready for the very real possibility of your income being cut or paychecks stopping altogether. And there are a few key ways to do that, including:

Saving more money for emergencies in a high-yield savings account so you have the cash to pay the bills for several months if you lose your job and it takes time to find another one.Putting off big purchases. You may not want to commit to a large purchase only to find you regret spending the money later.Paying off debt. If you already have a large emergency fund, making extra payments on your debt can be helpful. If you can pay off a loan or credit card and eliminate that monthly payment, this could make it easier for you to cover your costs through a recession.Build your professional network. Don’t wait for a job loss to get your resume in order, keep up with your professional contacts, and join professional organizations that could help you establish new relationships within the community.

By following these tips, hopefully even if the worst happens and you lose your job, you’ll be able to protect yourself so the layoff doesn’t have a long-term impact on your finances.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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Don’t forget to use the helpful credit card tools your card issuer offers. 

Credit cards make it easy to purchase items, whether you’re shopping in-store or online. Using credit cards with care is essential so you don’t harm your credit. Luckily, most card issuers provide useful tools to help you better stay on track with your spending and bills, making it easier to make the right moves when using your card. Here are some little-known credit card tips that can help you have better success as a credit card user.

1. Spending alerts can help you stay on budget

With today’s high prices, many of us follow a strict budget, so we don’t neglect our personal finance goals. If you want to set yourself up for success and minimize overspending with your credit card, you can use spending alerts to help you stay on track.

You get to determine your spending limits. Once spending alerts are enabled within your account, you’ll be alerted if you spend over your pre-set limit during your billing cycle. These alerts may make it easier to follow your budget so you don’t charge more than you can afford.

2. Set up card balance alerts to monitor your credit usage

Another feature you may want to utilize is card balance alerts. This can be an excellent way to monitor your credit utilization while keeping your spending in check. Your credit utilization ratio, or how much available credit you use, makes up 30% of your FICO® Score. Using less of your available credit and maintaining a lower ratio is best.

With this tool, you can set a limit, and you’ll get a notification when your credit card balance is higher than your pre-set amount. This can help you slow your spending, so you don’t put yourself in a difficult financial situation or make purchase decisions that hurt your credit.

3. Use payment due date reminders to eliminate forgetfulness

It’s essential to pay all of your bills on time. You’ll be charged late payment fees if you pay your credit card bills late. Additionally, if you put off paying your bills too long, you may find negative marks on your credit report — which can impact your credit score.

If you’re forgetful, setting up payment due date reminders can be beneficial. When you do this, your card issuer will send you a reminder a few days before your bill is due. This tool makes it easier to remember to pay your bill promptly.

4. Enable fraud alerts to protect your account

While many credit card issuers have built-in fraud protection capabilities, taking steps to protect yourself even further isn’t a bad idea. You can set up fraud alerts through your card issuer and get notified as soon as a potentially fraudulent transaction occurs.

For example, if pricy purchases are out of the norm for you, it may make sense to enable your alerts, so you’re notified if a costly transaction occurs. You can set up security alerts so you’re notified when a single transaction over a certain dollar amount is charged to your card. This way, you can quickly determine if fraud has occurred and take action.

Use alerts and notifications to your advantage

These are just a few tips to help you be a better credit card user. Using the many tools your card issuer provides makes it easier to manage your credit card accounts and make choices that help you keep your finances and credit score in check.

Are you looking to add a new credit card to your wallet? Check out our list of the best credit cards to learn more about some of your card options.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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It’s a tall order — but you may be able to buy a home sooner than expected. 

Buying a home can be a challenge at any time. But over the past couple of years, it’s been even harder due to the state of the housing market.

Since mid-2020, home values have been up on a national level. And this year, mortgage rates rose substantially. So all told, in 2022, buyers have faced an affordability crunch in particular.

It’s not surprising then, to learn that first-time buyers made up only 26% of all buyers this year, according to data from the National Association of Realtors. Now to be fair, first-time buyers don’t always comprise such a large share of the market. But a year ago, they made up 34% of buyers, so there’s been a big dip.

It’s easy to explain why first-timers tend to have more difficulty buying a home, though. First-time buyers, by nature, don’t have equity they’ve built up in another property. So they need to save up a lot of money to put down on a home — especially in a market like the one we’re in today.

If you’re hoping to become a first-time home buyer, there are steps you can take to achieve that goal. Here are a few key ones to start with.

1. Find the right real estate agent

A real estate agent who knows the local area and has experience working with first-time buyers could be your secret weapon in a market like this. That’s because the right agent will be able to negotiate with sellers on your behalf and help you navigate a bidding war should you wind up in one. The right agent will also be able to tell you when it’s worth it to pay up for a home, and when you’re better off bowing out in a situation where there are multiple buyers.

2. Get pre-approved for a mortgage before you start shopping for homes

You may not have a clear sense of how much house you can afford in today’s market. A mortgage pre-approval letter will tell you that. And that could help you better focus on looking at homes that fall within your price range.

Plus, when you make an offer on a home and you’re already pre-approved for a mortgage loan, it shows sellers you’re a serious buyer. That could help you get an offer accepted.

3. Consider a fixer-upper — but with caution

As a first-time buyer, your options may be limited, financially speaking. And so if you’re willing to buy a home that needs work, it could be your ticket to homeownership.

But before you buy any home, make sure it goes through an inspection so you get a sense of what fixes you’ll need to make and how much they might cost. Otherwise, you could wind up way in over your head — and in a worse position than you’d be in had you simply paid a higher price for a home in better shape.

Breaking into the housing market is not an easy thing to do today. But if you take these steps, you may have an easier time being successful.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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