Everyone is talking about it. Whether the words are “inflation”, “recession” or “stagflation”, the economists seem in agreement that the future will likely include a recession.
A recession is defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. On average, recessions last 11 months, according to Lindsey Bell, chief markets and money strategist for Ally.
We can just sit around and talk about it, just like the weather. Or we can take action by preparing for the storm, which some have forecasted to be more like a financial hurricane to be weathered.
And neither business nor consumer is exempt from the effects of the storm that is brewing. Although we are not technically in a recession yet, it seems it is on the horizon. However, if you ask consumers, more than one-third of Americans believe the economy is now in a recession, according to a poll last month by CivicScience. This is because their household budgets are feeling the pain at the gas pumps and in the grocery stores combined with concerns that their rate of pay is not increasing with the rate of inflation.
Tighten the belt
Often a first step in preparing for a financial storm is to tighten the proverbially belt. So let’s talk about controlling expenses. Regardless of whether it is a business or a household, it’s always a good thing to control your expenses. However, it becomes even more important in a recession when your business revenue or household income is down, and the cost of living keeps increasing.
So start by taking an in-depth review of the expenses you are incurring and begin by eliminating anything that is unnecessary or that you are not utilizing. For a business, some expenses that you don’t want to cut are items that ultimately bring in revenue to you such as advertising expenses. Of course, evaluate the effectiveness of the advertising so that you are not just spending money to spend money. For example, evaluate if you are targeting your ideal audience, not just casting a large net to see what you catch. Also, consider if the results are yielding ideal clients, ie potential centers of influence.
For consumers, the first thing to be cut is self-care and other non-necessary indulgences. This is especially true for large purchases like automobiles and refrigerators, unless they are necessary.
The time-consuming task of reviewing your expenses may result in discontinuing monthly memberships, subscriptions, or other expenses that just aren’t adding value.
After you’ve gone through your expenses once and eliminated the easy things, it’s important to go through your expenses again and take a hard look at where you’re spending money. Controlling your expenses is something we need to do in a good economy as well. But in a recession, it becomes even more necessary for the financial well-being of your household or business.
Since small business owners are the lifeblood of this country, it is important that they have a well charted course through a recession. That is why I have developed a roadmap with 10 waypoints to help business owners survive and even thrive through an economic downturn. It is a 3-hour training course on Friday, July 22nd from 9 AM to Noon and includes hands-on tools that will be ready for full implementation in the business. For more information and registration details, visit: www.SaundersTax.com/recession.php.
No matter what the future has in store for our economy, our passion is helping you experience a Less Taxing Life and More Prosperous Solutions. For more information about Saunders Tax & Accounting, visit www.SaundersTax.com.