The Washington PostDemocracy Dies in Darkness

7 ways a recession could be good for you financially

Hey, a recession isn’t all bad news. Here are seven silver linings.

Traders on the floor of the New York Stock Exchange on Sept. 23. (Spencer Platt/Getty Images)

In his first inaugural address in March 1933, President Franklin D. Roosevelt said: “So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself.”

It was the Great Depression. The unemployment rate was over 25 percent. An estimated 12 million people were out of work, about one-fourth of the civilian labor force.

“More than 11,000 of 24,000 banks had failed, destroying the savings of depositors,” according to the National Archives.

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

Fast forward to now, and as bad as things are — rising interest rates, high inflation, stock market tumbling — the economy hasn’t imploded as it did during the Great Depression.

I have to say this because, as Roosevelt pointed out, fear itself can lead to actions that worsen your finances. While many people are hurting, there may be ways to cushion the downside.

Five reasons why you shouldn't buy a house right now

Here are seven silver linings if we are heading into a recession.

1. Housing prices may finally come down to reasonable levels. The average rate for a 30-year fixed mortgage jumped to 6.7 percent this week, according to data released by Freddie Mac.

Higher mortgage rates may result in sellers in many markets lowering their asking prices so that buyers can qualify for the loans.

With cheaper loans gone, there will be fewer bidding wars to drive up home prices.

Mortgage rates hit 6.7 percent as housing market keeps cooling

2. Savings rates are up. At least one bright side of the Federal Reserve raising rates to fight inflation is banks are paying people more to hold their money. My credit union has a special 20-month offer on a certificate that would pay me a 3 percent annual percentage yield.

“Many prospective savers may not have yet noticed that yields have been on the rise,” said Mark Hamrick, senior economic analyst and Washington bureau chief for

Be sure to shop around, Hamrick said.

“Why leave money on the proverbial table when you can have it in your account? The key is making it a priority to have access to funds when and if an urgent development occurs,” he said.

By the way, no, you shouldn’t stop contributing to your retirement plan. Historically, over time, the market recovers. If you bail now, you will miss the recovery.

‘Revenge of the Savers’: Fed rate rises offer a boon to the cautious

3. I bonds inflation rate might go even higher. The Series I Savings Bond was created as a hedge against inflation. Until the end of October, the bonds are paying 9.62 percent.

There are two components to the return for an I bond — a fixed rate and the inflation rate. The fixed rate, which right now is zero percent, applies for the 30-year life of the bond.

6 key things to know about inflation-indexed bonds paying 9.62 percent

The fixed rate of newly purchased bonds and the semiannual inflation rate are announced by the Treasury Department each May and November.

If inflation stays high, I bonds could be paying more come November.

To buy an electronic I bond, you must set up an account at Individuals can purchase up to $10,000 in electronic I bonds in a calendar year.

4. The dollar is king. Although a lot is in flux, if you have plans to travel overseas, your dollar may go a lot further. This week, the British pound fell to an all-time low against the dollar.

Soaring dollar could help Fed in fight against inflation

5. Unemployment is still relatively low. People with jobs and money to spare can spend on luxuries such as a vacation.

Despite higher prices and rising interest rates, millions of Americans have been taking leisure trips.

More than half of Americans plan to travel for one or both of the holidays this year, even though airfares will be 43 percent higher than last year, according to Hopper, a travel booking app.

However, the unemployment rate did rise to 3.7 percent, according to the Bureau of Labor Statistics. So, if you’re worried about your job security, cancel any vacation plans you might have over the holidays or even for summer 2023

Cheaper travel is finally making a comeback

6. Your used car is worth more. If you’re looking to upgrade to a newer car, and your car is in fairly good condition, you’ll get more for your trade-in.

Used car and truck prices jumped 7.8 percent, according to the latest data from the U.S. Bureau of Labor Statistics. Unfortunately, new car prices were up 10 percent from a year ago.

7. Student loan forgiveness is coming. Roosevelt used his executive power to wage war against the economic emergency gripping the United States.

President Biden is doing something similar by forgiving student loan debt to help struggling borrowers. Biden announced a one-time forgiveness program that will wipe out up to $10,000 in federal student loan debt and up to $20,000 for Pell Grant recipients for individuals who earn $125,000 or less per year or less than $250,000 for married couples.

CBO: White House plan to cancel student loan debt costs $400 billion

The Biden administration also announced last year a time-limited waiver to help forgive more debt under the Public Service Loan Forgiveness program.

Act fast to sign up for the waiver. The deadline is Oct. 31.

Of course, times are tough — and for some people, much more than others. But remember that fear will not help you make wise financial decisions.

B.O.M. — The best of Michelle Singletary on personal finance

If you have a personal finance question for Washington Post columnist Michelle Singletary, please call 1-855-ASK-POST (1-855-275-7678).

Recession-proof your life: The tsunami of economic news in 2022 is leading consumers, investors and would-be homeowners alike to ask whether a recession is inevitable. Whether a recession comes, there are practical steps you can take to help shield yourself from a worst-case scenario.

Credit card debt: It is the worst debt to carry in good times. Here are seven ways to lower your credit card debt in light of the Fed’s signaling additional rate increases in 2023.

Test Yourself: Do you know where you stand financially? Take our quiz and read advice from Michelle.

Money moves: With the stock market losing 21 percent in the first half of 2022, and inflation a worry to consumers, people are desperately seeking a place to park their extra cash. If you have money sitting around earning a little more than 1 percent, if that much, I bonds are an attractive deal.