How to recession-proof your life

Stock markets are crashing. Mortgage interest rates are spiking. Gas is $5 a gallon. Let The Post’s Michelle Singletary guide you through these troubled economic times.

(Washington Post illustration; iStock)
(Washington Post illustration; iStock)

The tsunami of troubling economic news is taking its toll on consumers, investors, borrowers, and would-be homeowners. It’s understandable that you may be frightened about how all this will impact your finances.

Gas prices have hit a staggering $5 a gallon. Rents and mortgage rates are spiking.

The stock market is in bear territory. Cryptocurrencies continue to crash.

If all that wasn’t enough, now there are fears a recession is coming.

It’s fine if you feel like screaming. But there are some practical steps you can take to help shield you from the worst that could lie ahead. Here are some answers to your most pressing questions from previous columns.

1. What can I do to protect myself financially in a recession?

Feel what you feel, but don’t make irrational moves based on your fear. If you react before thinking long-term about a financial move, you could make things worse.

Remember: Recessions don’t last forever. The 2020 pandemic-induced recession lasted just three months (although that was unusually short). Even if you can’t control the stock markets — and nobody can — there are still some things you can do to blunt the impact of an economic downturn. Here is a good place to start.

Seven ways you can protect yourself financially, whether a recession is coming or not

Watch: How to prepare for a recession

Here’s what you need to know if you’re near retirement or retired

Revisit your investment strategies

2. Where do I start? What do I do first?

If you are carrying credit card debt, yes, you should be concerned.

The Federal Reserve pushed up its key interest rate by three-quarters of a percentage point. That means the interest charged on credit card debt will go up — and average credit card interest already tops 20 percent. So it makes sense to do as much as you can to get rid of that debt.

Here’s how you can get started.

Seven ways to lower your credit card debt after the Fed rate hike

Try the ‘Debt Dash’ method

How to pay down your credit card debt

3. Are there any smart moves where I can actually make money?

There’s at least one place you can put your money now to keep pace with inflation. Buy Series I government savings bonds.

The Series I inflation-indexed savings bond was introduced in 1998 and is sold at face value, so you pay $100 for a $100.

The earnings rate is a combination of a fixed interest rate, which stays the same as long as you hold the bond/for the life of the bond, and an inflation-indexed rate which is adjusted twice a year.

Right now, in response to rising inflation, the I bond is paying 9.62 percent. The inflation rate will be adjusted next at the beginning of November — and could go up or down depending on inflation — but for now that kind of return on a risk-free investment is impossible to beat.

Here’s more about the I bonds.

How to buy Series I saving bonds

Answering Ask-Post questions about I bonds, crypto cons, bank accounts

Six key things to know about I bonds

4. What about keeping my money in a savings account?

Financial institutions are still paying pitiful rates on deposit accounts, but with interest rates rising, it could be time to shop around for better saving rates.

And when you do your research, don’t limit it to brick-and-mortar financial institutions. Internet banks are offering some attractive rates.

Here’s why it may be time to break up with your bank

5. What should I absolutely not do now?

I get it. All the news about the stock market tanking has you wondering if you should pull back or get out.

But don’t stop investing because the stock market is down. Historically, these bear times don’t last.

You might be tempted to jump into more speculative investments such as cryptocurrencies. That’s not a wise move for the average investor. Check out these columns:

This crypto investing was supposed to be ‘stable.’ It’s a wild ride.

No, cryptocurrencies shouldn’t be added to 401(k) plans

What to know before you add bitcoin to your 401(k)

6. How about if I try to time the market?

No, you shouldn’t try to figure out when to jump out of the market and back in. That’s trying to time the market.

In the long run, slow and steady stock-buying easily beats trying to time market dips, experts say.

Do you want to be a successful investor? Then do what the average 401(k) millionaire does. And yes, many may have lost their millionaire club status based on this year’s stock market drops. But they know — based on how the markets rebound after previous recessions — they will eventually come out okay.

A record number of workers are becoming millionaires with their boring 401(k)s and IRAs

Some people can’t afford rent, others became 401(k) and TSP millionaires

Want to be a 401(k) millionaire? Here’s what it takes

7. What do I do about high gas prices?

Gas prices have gone up an almost unbelievable amount over the last two years, thanks to inflation and the war in Ukraine.

Filling up your car with gas has become a constant reminder of rising inflation. Until prices retreat, here are some tips to help make your visit to the gas station a little less painful.

Strategies to save money at the gas pump

8. What can I do if I’m just starting out and not making much money?

As a young adult, I couldn’t wait to get out on my own. I was raised by my grandmother, Big Mama, and some of her house rules drove me bonkers — no shoes under the bed, don’t turn the television knob to the left, only to the right (this was before remote controls), chain the front door at 11 p.m. One time I had to call a neighbor to get my grandmother to open the door.

So I get it. Home is not always where your heart is. But in an economy where rents are ridiculously high, one of the smartest financial moves you could make — if possible — is to live at home, or with relatives.

If you can cut the biggest expense in your budget — housing — it can help you weather a recession.

With higher inflation, living with your parents makes economic sense

9. What if I need more specialized advice?

If you are unsure of what to do with your retirement account or worried you may make a wrong move, get help from a financial adviser. I’ve got some advice to help you find one that’s right for you.

Watch: How to find the right financial advisor for you

Your tax questions, answered