The Economic Forecast & Planning Ahead For Your Business
It’s no secret the last few years have been tumultuous, and the effects of Covid and the news cycle have been especially felt by small and medium-sized businesses and start-ups.
A recently released survey by the Association of International Certified Professional Accountants (AICPA) highlights the concerns felt by many Americans. Nearly 75% of finance and business executives believe we are at risk for a recession and cite the biggest impact on our economy as the one felt by all: inflation.
The key to weathering any storm is planning and preparation, and that same logic applies if we’re facing an economic downturn. From cash flow management to creating an accountable plan, preparing in advance will help keep you afloat when challenges arise.
What’s in the Economic Forecast for 2022?
Rising interest rates and increased costs of energy, labor, and food are setting off alarm bells for many. However, the job market is still showing positive signs. With reduced unemployment rates and increased wages, more Americans are in a better position financially than they were two years ago.
At the same time, supply chain issues, global conflicts, and economic stimuli have all contributed to rising inflation. The AICPA points to this swing toward recession as a way to balance the scales, but some experts believe that any recession we experience will be short-lived. That’s good news—but it doesn’t mean there aren’t steps you should take to protect yourself beforehand.
4 Tips to Build an Emergency Fund Now
As we continue to monitor the economy, we all can take steps to minimize the impact on our businesses and personal finances. We’ve all been told to have a “rainy day fund” and, with potential storms on the horizon, building an emergency fund now can bolster your peace of mind as we move forward.
Here are some tips to get started:
1 - Know Your Goal
The standard recommendation for an emergency fund is three to six months of expenses to help cover unforeseen costs, from repairs to health-related issues and even job loss. To quickly identify your emergency fund goal, use an emergency fund calculator to take out the guesswork.
2 - Create a Budget
While dining out, vacations, and other nonessential purchases might need to be temporarily eliminated, you still want to have money to comfortably live your life.
Try the 50-30-20 method: allocate 50% for critical expenses, 30% for discretionary spending, and 20% for savings and/or paying down debt. This is a straightforward way to ensure you’re able to save without feeling deprived.
3 - Keep Your Savings Separate & Automate the Process
Open a separate savings account (ideally one with a higher interest rate than other savings accounts) and set up direct deposit to keep your emergency fund out of sight and mind. Think of it the same way as your retirement fund; it’s just as important!
4 - Save Any “Extras”
Stashing away any additional income, from tax refunds to bonuses, can help you reach your emergency fund goal faster. Foregoing more immediate gratification could end up making a huge difference if you need that money later on.
As financial advisors, we believe the best approach to protecting your business and assets is through planning for all scenarios. A dedicated Modis Advisor can help you create a plan for the potential recession and beyond. Reach out today to get started.